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The recent flooding in Queensland is not expected to have any material long-term impact on its local housing market, but the next few months could potentially hamper the stellar gains achieved amid the pandemic.
BuyersBuyers co-founder Pete Wargent said while safety, repairs, and insurance are the key priorities of many property owners in the short term, the floods are not expected to make a significant dent in the housing market.
“Over the medium and longer-term, history shows that there will be a relatively insignificant impact on the housing market,” Mr Wargent said.
“In the aftermath of the 2011 flooding, there was a modest downturn in prices, although the market was already experiencing relatively flat conditions at that time, after a preceding boom”.
Brisbane is one of the two capital cities that have defied the slow down in price growth until last month, when gains eased slightly.
February figures show that monthly gains in Brisbane slowed down to 1.8%. This, however, remains the strongest monthly price growth that outperformed the national figure at 0.6%.
How might prices fare in the short term?
CoreLogic head of research Eliza Owen said the 2011 flooding in Brisbane could give a glimpse on how property prices perform over the next few months.
“Following the Brisbane floods in 2011, the city’s dwelling values sustained a decline from January 2011 to January 2012, which bottomed out at a decline of 6.1%,” Ms Owen said.
However, it is difficult to isolate the impact of the flooding on, given that property prices in Brisbane were already trending lower even before the event.
“This decline was triggered by a tightening in monetary policy amid a resources boom and Australia’s recovery from the GFC,” Ms Owen said.
It is important to note, however, that flood-affected areas reported sharper declines during the period than greater Brisbane.
Ms Owen said the short time frame between significant flooding events could affect the market by shifting buyer attitudes around housing in low-lying areas.
“It could see markets with low flood risk attract greater demand over time and result in higher insurance premiums, which may dissuade buyers from areas vulnerable to flooding,” she said.
Furthermore, the recent flooding is expected to boost repair and renovation costs at a time when the building industry is already experiencing the heat from high demand and shortage on labour and materials.
Five-year recovery
BuyersBuyers CEO Doron Peleg said the impact of the floods on property prices would become a “distant memory” given Brisbane’s potential for recovery.
“A few years ago, our market research showed that out of the top 20 suburbs impacted by floods in 2011, 19 of them outperformed the Brisbane house price growth benchmark over the following five years,” he said.
“The only exception was Pinkenba, which is quite an unusual suburb with relatively few transactions, being more impacted by other factors, such as proximity to the airport.”
Fig Tree Pocket reported the biggest five-year recovery at 53%, overshadowing Brisbane’s 26%.
Meanwhile, Bulimba, Yeronga, New Farm, Indooroopilly, and Tennyson posted gains of at least 40% over the next five years following the flood.
Mr Peleg said the gains posted in these areas debunk the perception that flood-prone areas experience long-term downtrend in price growth.
“Part of the reason for this was that many of the suburbs were located close to the river, with water often being a drawcard for buyers in Australian real estate — most buyers were able to look through the risk of flooding as an infrequent event which they were prepared to deal with,” he said.
“It also helped that some of these locations were subject to rezoning, which made them potentially attractive to investors and developers.”
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Photo by @quirkydude on Unsplash
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