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Gulf of Mexico coastal homes may lose as much as US$56,000 each in value as buyers shun areas marred by the worst oil spill in US history, according to CoreLogic.
Waterfront properties in Gulfport, Mississippi, face the biggest average declines, followed by those in Mobile, Alabama, and Pensacola, Florida, the real estate data firm said in a report. Losses along the coast may total US$648 million this year and US$3 billion over five years, CoreLogic said.
The disaster threatens to wipe out the premium Gulf Coast homebuyers paid for ocean views and water access. BP's efforts to staunch the oil may not be enough to stem a drop in property prices, Mark Fleming, chief economist of Santa Ana, California-based CoreLogic, said.
"It's not only about whether the oil arrives," Fleming said. "There's evidence something as catastrophic as this scares people away."
More than 600,000 properties may be affected from Alabama to Florida's Atlantic coast, according to CoreLogic. The long-term impact on beaches depends on sea and wind currents, clean-up efforts and stigma, Fleming said.
In counties with the greatest exposure - Harrison in Mississippi, Mobile in Alabama and Escambia in Florida - the spill may diminish values for about 71,000 homes, CoreLogic said. Property owners may recover some losses. BP booked a pre-tax charge of US$32.2 billion related to costs from the leak, including US$20 billion reserved to pay damages. The company will compensate for lost earnings, clean-up and property damage, its website said.
BP is reviewing each claim individually, relying on the Oil Pollution Act of 1990, which lays out a framework for compensation including for property value losses, Steve Rinehart, a spokesman for the oil firm, said.
Florida governor Charlie Crist signed an executive order on July 21 authorising property appraisers in 26 Florida counties to update assessments so owners can "substantiate claims against BP or other responsible parties".
Christine Karpinski, who owns condominiums she rents to holidaymakers in Panama City and Destin, Florida, said BP paid her for lost rent in May and June and left open the possibility of reimbursement for any decline in value. It's difficult to estimate price declines because no one is willing to buy properties, she said.
"Things aren't selling now," Karpinski said. "Anything you say about pricing is just speculative."
Kenneth Feinberg, the Washington attorney tapped by BP and the Obama administration to decide claims, said home value reimbursements would be made on a case-by-case basis. "There's no question that the property value has diminished as a result of the spill," he said during a June 30 congressional hearing. "That doesn't mean that every property is entitled to compensation."
For its damage estimates, CoreLogic examined records of 600,000 residential properties within 1,000 metres of the coast in 15 counties in Mississippi, Alabama and Florida. It had insufficient data to analyse Louisiana's coast, Fleming said. Potential losses were calculated by comparing the price differences of beachfront and inland homes, he said.
BP plans to inject mud down its Macondo well in the Gulf to begin permanently plugging the spill.
CoreLogic separated the potential oil-related price declines from those tied to economic drivers such as unemployment or foreclosures, Fleming said.
Florida has the third-highest rate of foreclosure filings in the nation, behind Nevada and Arizona, according to RealtyTrac.
The oil spill may depress values of all residential and commercial properties by 10 per cent along a 965-kilometre stretch from Louisiana to Florida, according to a June estimate by CoStar Group. That would total about US$4.3 billion in losses.

This article can be found on South China Morning Post, Wednesday, August 4, 2010

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