How will the Brisbane floods affect home prices?
Brisbane is picking itself up from possibly our worst natural disaster. Lives were lost and damage is significant. Two of the Bees Nees team suffered flooded homes this past week so we won’t be understating what’s been a major event for Brisbane.
With the media’s frenzy of interest over the past 2 days we do think some common sense is getting lost in an increasingly emotional debate about home prices. There’s no doubt homes that were completely flooded will see a drop in value. We’ve talked to some old heads in our industry, including two who worked in the aftermath of 1974’s floods, and they offered an informed opinion on how much that might be. We also spoke to the head of a national property valuation firm and interestingly he offered the same number – “up to 20 or 25%”.
This is a big potential reduction and all agree luxury riverfront homes will be worst hit. Cheaper properties might not drop as much, and buying a home that flooded in 2011 might soon be comparable to living on a main road or a railway line: you put up with it to have a better home for the same price.
The scaremongering talk in the media of 50% plus drops is just not based in fact, and irrational fear can follow. Will some flooded home owners panic-sell? Maybe. Will bargain hunters be waiting? Of course. But for most owners of flooded homes we’d expect they will clean up, move back, and accept that their property’s value will not be the same. Based on the 1974 experience there won’t be half-price-homes nor a large number on the market.
Partial flooding might only have a relatively small impact on prices. Houses that had water in their yards only, apartments that stayed dry but with basements that flooded – what will buyers make of these? It’s too early to really know, but early signs are that the appeal of inner city living is still stronger than ever and many buyers will accept some risk to be a part of this.
In 1974 no-one knew what flooded and painted lines on the streets recorded the high water marks. Today there’s a huge number of aerial photography sites and Flickr, YouTube and Facebook pages that have catalogued the damage. Home buyers might actually start using Council’s flood mapping info, launched after our last major flood event in May 2009. (Interestingly we had a third of our average annual rainfall on that one day, a reported 15% of homes were affected and 20 months later it’s already been forgotten by many of us…)
Will “dry” properties experience a boom? Based on the minimal true effect on our housing stock our ‘old heads’ just don’t see enough reason for a price spike. We are in for a surge of spending on renovations and some commentators believe this will give the local economy a huge shot in the arm. Market analyst Michael Matusik believes there could be a silver lining with the flood aftermath and renewed civic pride a “key ingredient to restore long term confidence.”
A lot of Brisbanites are suffering right now and it’s definitely not business as usual for inner-Brisbane real estate. But when the flood effect on home prices is debated at your next weekend barbecue we’d encourage you to see through the hype and consider why homes in these areas have always been so sought-after by home buyers. How much of that has changed?
We’d love to hear your opinions.