How will the Brisbane floods affect home prices?
photo from Brisbane Area Flood Photos & Info on Facebook
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.
Prices of everything, including property are entirely based on supply and demand. It’s inevitable that the demand for flood effected homes will drop as people look for somewhere else that wasn’t affected, or as the article points out, some people will be prepared to take the risk. Everyone has to live somewhere so those who aren’t prepared to take the risk, albeit for a cheaper price, they will buy somewhere else, so the demand will be more concentrated in other areas.
I believe there will be a huge influx of tradespeople moving from the other struggling states to Brisbane where there will be huge demand for their trade. Much like people moving to the small towns that support the mining industry, rents will be driven up significantly. That will then drive up property prices in those suburbs as investors increase the demand as they chase the increase in rental return. Typically areas that investors look for properties are the same as the first home buyers as they are cheaper to purchase and tend to exist in the city fringe suburbs (10 to 25kms out of the CBD).
So my thoughts are that there will be a mixed impact on property prices. Lower priced properties in the outer city ring will grow in price due to investor demand. Houses in areas close to the city that weren’t flood effected will also climb as people that would otherwise have bought in the flood effected zone, look elsewhere and flooded homes will drop in price as demand drops.
The alternative is we have a huge number of people leave Brisbane and prices overall drop as the demand drops, though I think this is the least likely outcome.
We need to keep in mind that there has been a general property shortage in Brisbane for sometime and less houses means more demand.
After 1974 floods several visibly shocked Brisbane residents flagged us down and pulled up at our property at Cedar Creek, Samford and asking if we had blocks for sale. They just wanted to be high and dry.
We do have blocks currently for sale – the internet ad currently says “High and Dry”.
People didn’t learn or retain the 1974 lesson. Authorities seem to have been at pains to hide the flood maps. We retained the valuable 1974 coloured map printed by the Courier Mail- laminated it.
People should not be allowed to rebuild on the areas that went under. When a river floods it needs to spread somewhere. Wivenhoe Dam saving the city is a myth.
Brisbane needs to take some lessons from London.
Thank God for your intelligent, practical and well-informed approach to this major event. May there be more of it and less of the hysterical and poorly informed hype that comes from the media throughout the country. Most people will roll up their sleeves and do what needs to be done. The market will look after itself. So let’s not increase people’s misery with dramatic speculation of further losses.
We lived in a rental home that was flooded over the roof. We were in the process of putting in an offer on the house opposite us. After going through this experience I will NEVER buy a house in a flood affected area – even if it was priced at 50% or below. Good luck to all that will consider it!