Say Melbourne gets flattened by earthquake

I was wondering, what happens to rental properties if a whole city is flattened by earthquake?

I would assume my house would get destroyed and tenant would no longer pay rent.

Or if you have a apartment, whole block falls, making it unliveable.

now obviously with such large scale destruction, it could take years to rebuild.. especially apartment blocks.

Then what about the reduced rent you would possibly get due to lack of work following etc.. what a mess!

Where does this leave the investor?

I would assume landlord insurance would cover 12 months rent.. and then what?

I think some investors here with several properties, would become bankrupt from this.

Unfortunately with the frequency of these accruing, its a valid consideration to plan for.
 
I suggest reading the news. last couple months, two cities flattened around the world..

In the case of earthquakes, while they can happen anywhere, they're most common around plate edges, eg up and down the Pacific coasts of the Americas, the Mediterranean and NZ.

So while it's not foolproof, careful location selection can reduce this risk.

A precedent closer to home is last year's bushfires (although these are mainly in areas with seperate houses rather than apartments). Forumites who owned IPs at Kinglake or Marysville may be able to comment on what happens.

The bushfire appeal fund has made grants available to those affected, including assistance for tenants who have lost household items and relocation expenses.

http://www.wewillrebuild.vic.gov.au/financial-and-personal-support.html

The number of people affected by something major in Melbourne may exceed those of the bushfires so the capacity to provide the same amount of per capita assistance could be smaller (although historically Australians are generous givers in disasters). Hence it would seem prudent to check one's insurance policies and encourage tenants to insure their belongings as well.
 
I suggest reading the news. last couple months, two cities flattened around the world..

According to wiki, if you assume a city is a city if it contains 100,000 or more people, then there are approximately 3,400 cities in the world.

2 went down = 2/3400x100% = 0.06%
...........not good if you happen to be in one or both of those 2, but the chances of nothing happening is pretty damn good.

If you want to reduce risk - buy in a few other cities.
 
you might also want to take out an insurance policy with a foreign insurer.
local insurer's would probably go to the wall, or take 5 years to pay out.

though afaik, all insurers insure each other and many of our insurers have foreign ownership interest, so probably no advantage for a massive calamity.
 
I think Chilli and Haiti cities are a bit bigger than 100,000. consider 10mil for Haiti and 16m for chilli. so if you re-do your figures for 10mil+ I think your % figure will change.

regardless, this isn't a discussion about what are the chances happening to melbourne.. its about how we would sit as investors should it happen.

You can choose to dig your head in the sand, thats fine, but I believe its a real risk here. There are even discussions of a tsunami wiping out melbourne due it to been low lying city.. so you can add that to your risk profile of melbourne.
 
If you are worried about what happens to your IPs in a disaster scenario then i would recommend that you get out of the property investment game and invest all of your money in a building/construction company - then you'll be one of those rare types that makes money from disasters (and in the meantime you'll be making a decent amount of money building up properties due to the population explosion that is going to hit as well)....

On a serious note, disasters come and go. But no major city in recent history has ever been walked away from. It is rebuilt. Look at Hiroshima, totally flattend by a wee bomb but look at it now. Look at Darwin in '74. They were debating on walking away from that but ended up totally rebuilding it.

The only possible reasons for people to abandon a city is: volcanic desstruction (pompeii) and nuclear accident (chernybol). There are maybe other possible reasons to totally abandon a city but I'm rather certain that the Melbourne area is safe from the above.

But as long as you own land, that is real land, and not own space in an apartment block, then you'll be ok as you can always rebuild. As for apartment blocks, i would hate to try and work out the issues in rebuilding one of those. That's one reason i like houses on real land.

I wouldn't worry about Melbourne if i were you. It's not in an earthquake zone (touchwood) and besides, according to Neville Shute, it is the last city in the world that will be destroyed.


Thanks


g
 
On a serious note, disasters come and go. But no major city in recent history has ever been walked away from. It is rebuilt. Look at Hiroshima, totally flattend by a wee bomb but look at it now. Look at Darwin in '74. They were debating on walking away from that but ended up totally rebuilding it.

Although sometimes the reconstruction can be on a smaller scale than what was there before - eg New Orleans.

http://en.wikipedia.org/wiki/Reconstruction_of_New_Orleans
 
Another one that i didn't think of was social disaster - ie Detroit. I guess you could say people have walked away from a portion of that city.

Will Melbourne ever suffer social disater like Detroit?



g
 
Melbourne (most of it) is already flat........... :p ;)

So true Michael - after spending some time is Sydney over the past few weeks, one of the many things that has struck me is the difference in topography between the 2 cities and how flat Melbourne is by comparison.
 
Unfortunately with the frequency of these accruing, its a valid consideration to plan for.

No, it's not.

Other disasters maybe, but not earthquake. Melbourne is not in an earthquake zone.

You know it when you live in an earthquake zone. You plan, you take out insurance, you feel the earth shaking a lot and always wonder if it will be the big one again. There are realtime updates that you have on your computer toolbar:
http://quake.usgs.gov/recenteqs/
According to this SF had 727 earthquakes in the last week. How many did Melbourne have?

Worry about something else. :)
 
If there was a likelyhood of a disaster wiping out an entire city then I would probably be more concerned about the death and injuries toll.

I can't imagine my IP's would be my biggest concern if hundreds/thousands of people including family, friends and neighbours were killed and injured.

Infact in that situation you could be a casualty yourself and your IP's wouldn't matter at all :confused:.

I'm more concerned about housefires, tenant damage, personal sickness, unemployment and financial risk profile.
 
I think Chilli and Haiti cities are a bit bigger than 100,000. consider 10mil for Haiti and 16m for chilli. so if you re-do your figures for 10mil+ I think your % figure will change.

regardless, this isn't a discussion about what are the chances happening to melbourne.. its about how we would sit as investors should it happen.

You can choose to dig your head in the sand, thats fine, but I believe its a real risk here. There are even discussions of a tsunami wiping out melbourne due it to been low lying city.. so you can add that to your risk profile of melbourne.

CRC what do you reckon we should do? What are you going to do?

To play it safe one option for me is to sell up my entire portfolio, because its currently located in mainland capital city metro areas, then re-building in highland regional areas with population densities of <100,000. PLUS relocating my family.

Being a very risk adverse investor, this is a potentialy serious underlying issue that I had never really taken into consideration.
 
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Hi all,

Last time I looked neither 'Haiti' nor 'Chile' were cities.

Everywhere gets earthquakes, major earthquakes happen at continental plate boundary edges, CRC do some geography homework.

Tsunami hitting Melbourne? Where would it come from?? Half of Tasmania falling into Bass Straight?? Sorry it's too shallow, wave energy would be dissipated across the shallow bottom, some would get through the heads of Port Phillip Bay, the 10cm high Tsunami would upset the kids who built sandcastles on the beach near the waters edge, so if you count that as 'property' :p

Again do your geography homework.

Even if half of NZ fell into the Tasman sea, creating a 300 metre high Tsunami that hit the East coast, Sydney would be toast, err wet toast, yet Melbourne would hardly be touched, if at all (except economically, because it would have all those NSW refugees).

bye
 
Rely on the sinking funds from units to payout the builidng. then again as i live in one and if it's flatten... i'll be gone anyway.. so wouldn't worry abt it.
 
re

To me, I woudn't worry much about Earthquakes. Its a natural disaster, and if there is one hitting Melbourne that 'flattened' everything, then I would be more than happy if I escaped with my life and that of my family and friends.

So aside from putting money in to reliable insurance and hoping it does not tank in an event of large scale disaster, there isnt much that a mere mortal like I am can do.

.... Unless, people here have other ideas??? I would be keen to hear them.

Warrenkh.2010
 
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