BP Plc’s oil spill may drive down Gulf Coast property values by 10% for at least three years, according to a forecast by CoStar Group Inc. It was estimated in mid-June that losses could total $4.3 billion along the 600-mile stretch from the Louisiana bayous to Clearwater, Fla. The property-information service’s estimates are very conservative. I fear the losses will be much higher. Falling real-estate prices are clearly another consequence of the worst environmental disaster in U.S. history. Oil washing ashore will further harm property values in an area where Moody’s Economy.com estimates prices fell as much as 34% from the peak of the U.S. residential real estate market in 2006.
The spill may cost BP almost $50 billion in cleanup and reimbursements for economic damage to the tourism and fishing industries. But that doesn’t include the very real effect on property values. Costar, based in Bethesda, Maryland, made its forecast for property prices assuming a 10% loss based on previous disasters, such as oil spills, hurricanes and the 1979 Three Mile Island nuclear accident in Pennsylvania. Its estimate relied on recent sales data of property within 200 feet of the Gulf waterfront and spanning 600 miles from Venice, Louisiana, to Clearwater, Florida. The analysis valued the property at about $3 million an acre or $43 billion for the entire coastline measured.
St. Joe Co., which owns 578,000 acres in northwest Florida, including about 130 miles on the Gulf Coast, has seen its stock fall 34% since April 29th. The company has built protective berms and taken aerial photos and soil samples as evidence in case it files damage claims with BP. This company will be one of the big losers on the coast.
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