Hi Tilly,
If it was me, I would refund straight away, while contacting the buyer, requesting that if the goods do turn up, they will pay again.
At the same time, ask the buyer to confirm the correct delivery address, and if the original address was incorrect, try to open a dialogue, with a view to getting your buyer to take responsibility.
This should be done via, or noted in, the PP dispute process, so that you are not contravening the system..
Cheers