8 July 2014 — Flood-prone suburbs in Brisbane only saw a temporary reduction in property prices following the 2011 floods, with middle and high-value homes rebounding in just 12 months, research from the University of Queensland has discovered.
Property economics expert Professor Chris Eves from QUT’s Science and Engineering Faculty studied the short-term impact of the 2011 flood on the Brisbane residential housing market and found flood fear had a minimal ongoing effect on property prices, except for in low-value suburbs.
“What we found was that because people in the higher-value suburbs (St Lucia, Bulimba) had the means to repair immediately, the market didn’t see flooding as much of a detriment compared to low-value suburbs (Goodna, Oxley), because the visual impact of damaged homes was removed,” Professor Eves said.
“So the stigma of the flood wore off very quickly.”
The study looked at residential sales and rental listings as well as property prices immediately following the 2011 Brisbane floods, with the findings published in Natural Hazards.
“The only sector that did not show a decrease in median house prices three months after the flood was the flood-affected medium-value suburbs (Fairfield, Graceville), which actually saw an increase of about $23,000 in the median house price,” Professor Eves said.
“This can in part be explained by the fact that most of the medium-value properties experienced overland flood, with only limited in-house flooding, which was more of a nuisance than costly, and the physical evidence was more quickly able to be removed.”
The short memory of the market may come to haunt buyers, as the risk of a repeat event – and its associated effect on insurability – increases.
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The biggest drop in property prices was for lower-value suburbs.
“The median house price in the low-value flood-affected suburbs dropped 22.7 per cent in the three months immediately following the flood with a greater number of flood damaged homes sold,” Professor Eves said.
“This is most likely because in the low-value suburbs, owners may not have had the means to repair their properties so selling at a reduced price was the only option.
“And for buyers, who were mostly investors, the lower price even with adding on the repair bills made good economic sense given the potential future rental returns.”
Even today there were still many unprepared properties in low-value suburbs, Professor Eves said.
“This unrepaired damage continues to have a visible impact on these low-value suburbs such as Goodna, and an effect on property prices,” he said.
The findings go against previous long-term studies, that have found disasters like major floods could create a difference of up to 35 per cent in value between flood and non-flood-affected properties.
“This was not the case in post the 2011 Brisbane flood,” Professor Eves said.
- Sales listings: Flood and non-flood affected suburbs showed decreased sales listings between January 2011 and September 2011, at which point both saw an increasing trend in sales listings.
- Rental listings: There was an immediate decrease in rental availability after the flood. From September/October 2011 rental availability increased for medium to high value flood and non-flood affected homes. Listings for low-value flood-affected properties spiked faster in June 2011.
- Prices: Prices in flood and non-flood affected suburbs dipped immediately after in the first quarter after the floods, but continued to steadily rise for the following three quarters. The exception was in the medium-value flood affected properties, which saw an increase in value in the first three months.
Class action launched against Queensland government
The news on the limited affect on property prices hasn’t stopped a $1 billion class action against the Queensland government and two dam operators being lodged by lawyers today (Tuesday) on behalf of 4000 residents.
The class action is believed to be the largest ever in Australia, the Australian Financial Review reported.
It is being handled by law firm Maurice Blackburn and litigation funders Bentham IMF, who allege the operators of the Wivenhoe and Somerset Dams were negligent in their operation of the dams both in the lead up to and during the floods.
The case is expected to go to trial in early 2015.