By Justin Eslick
This is the first significant natural disaster that I have witnessed, so perhaps it is a little wrong for me to make too many comments regarding what is likely to happen to the Brisbane property market as a result of these floods. Geoff Doidge of the Reno Kings did witness the 1974 floods, so his input is invaluable. Judith Taylor of Property Women has also witnessed two natural disasters in Newcastle and offers her comments on what happened in that area, from which you may be able to draw conclusions for the Brisbane Market. I will, however, make some general comments based on what I know and what I have read.
Comments from Justin Eslick – Buyer’s Agent
The market pre-flood was fairly quiet, in particular the rental market, which has essentially been stagnant for over a year. This will change. It is a lot easier for a tenant to walk away from a flood affected property than it is for an owner. These tenants will seek higher ground. We are already seeing this with commercial property where some businesses are looking to relocate, even if it is short term. There may also be an influx of interstate workers who can secure good employment as the result of the rebuilding process, such as tradespeople.
So the rental market is likely to be very buoyant. This may well translate to local investors buying rental properties as they recognise the opportunity.
Interstate buyers may hold back though. If you are a local and you consider the media coverage you have seen and pretend you don’t know Brisbane, or if you are from elsewhere and don’t know Brisbane, then you would think the whole city had gone under based on what you have seen. This is most certainly not the case. A lot of areas have flooded and in a bad way, but most of these areas are low lying areas that regularly flood (obviously not to this level), or at least they did before our recent drought period. The majority of Brisbane is high and dry. In fact there was hardly any flooding east of the city. Most flooding occurred to the South and West where the Brisbane River snakes around, creating peninsulas which are usually low lying. When you look at the city as a whole most of it was unaffected, but while this may be the case, you can be forgiven for thinking everything went under based on what you have seen in the media. For this reason we may see less interstate buyers looking to invest in Brisbane.
Comments from Geoff Doidge of the Reno Kings – Based on his recollections after the 1974 floods.
My recollection is that there were ‘no go’ property zones for years after the ’74 floods. For a period the areas that were heavily damaged in the flood affected suburbs lost value and everyone was ‘gun-shy’ of any serious rains for some years.
The flood maps were compiled and were used as a optional paid search when you bought a house. Discovering your house had been flooded in ’74 was a definite reason to crash the contract.
The building of the Wivenhoe dam became a circuit breaker in this process. It was commonly believed that if your property ‘just’ flooded in ’74 then it would now be ‘flood free’ because of Wivenhoe.
Gradually though memories faded and there was the beginning of the massive migration into Brisbane by interstate and overseas people who had not experienced the devastation of ’74 and to whom these areas looked cheap.
There have been many ‘flash flooding’ events in Brisbane over the years since 1974 and the most poorly located houses in those suburbs, normally near creeks, were regularly affected by flash flooding, but the properties on the actual Brisbane River were less affected and some have never been affected since 1974 until now.
We have been given a ‘heads up’.
The flood of ’74 commonly referred to as 1 in 100 year event, has been followed 36 years later by another flood of similar (or greater) magnitude. We are entering the wet season with full dams and saturated soils. We have a strong La Nina (read wet) influence which shows no sign of changing. Without being alarmist there is the potential for more events of this nature in the coming few months, not necessarily in Brisbane, but across our sodden state.
None of my 53 properties flooded this time and I do have some that were at risk in ’74. Use the research available to check any potential purchases and even go and ask people in the area where the waters got to in previous deluges. Areas can sometimes be affected by local flooding even if they appear clear on the ’74 map. Check overland flow paths too. That is much more common and potentially disruptive than the occasional flood. This overflow path research is now available.
Personally I wouldn’t be tempted to buy a ‘bargain flood affected’ property. Just because we have had a 1 in 100 event... that is just a statistic ... it does not mean it can’t happen next year...or the year after. Keep that in mind.
I prefer to sleep at night when the rain is pouring down and the rivers are rising along with the fears and stress levels of people with threatened properties... let alone the massive clean-up afterwards followed by the period with either ‘no home’ or ‘no rent’ for maybe months and months until the stinking sludge is gone and the house has dried out. Then follows the expense of renovation or demolition and rebuilding...depending on whether you have insurance.
This is a lesson to do your research. The first step of the Reno Kings tried and tested ReBATES system and constantly pointed out in the Renovation Success Workshop and also by Town Planner/buyer's agent Justin Eslick of Investigate Property at the Developing for Profit Workshop, where he does an in depth segment on flooding, overland flow and research.
The future of Brisbane Property values.
Probably a reflection of the past. A ‘gun-shy’ period where everyone’s ‘flood radar’ is up. A drop in value of the affected properties (not necessarily the whole suburb).
It does depend if we get another event within a few years... that would really scare the pigeons!
I think the shortage of suitable property may wipe out the vacancy factors in the short term. Many people are staying with friends, family or emergency accommodation and they will tire of that within months. I can’t see tenants rushing back into an area that has flooded and wiped out their belongings.
Fully furnished property may be in demand for a period until people get back on their feet.
Building costs about to soar as the emerging energy industry grabs the few tradies available who are not fixing up houses. Remember there is flooding over a lot of Qld towns and other states as well, so where are these tradies going to come from?
I would think as long as this event is not repeated in the short term there is a chance that well located and flood free property will maintain or increase it’s value, especially as I think there has to be a major increase in overseas migration to handle the impending explosion in multi-billion dollar energy projects.
I would think an increase in demand for property in the next few years is near as guaranteed. Availability of finance is a whole different question and will have an effect on what is actually built.
All in all the great flood of 2011 is just a blip on the radar of the long term investor with well researched property but a massive blow to the flood affected home owner or investor who either by lack of research or a wish to defy the odds with a gamble on the weather bought property in these areas and are paying the price.
Comments from Judith Taylor of Property Women, Newcastle
From the perspective of Newcastle’s 2 disasters, being the earthquake in 1989 and the Pasha Bulka floods in 2007, once the dust settled, the economy was certainly boosted, properties were upgraded and improved and values went up considerably. The June 2007 floods claimed 11 lives and forced the evacuation of thousands due to flood damage. Many tenants had to vacate properties they were renting and many homeowners whose properties were made uninhabitable also had to seek alternative accommodation. Rental properties were at a premium and many moved in with family and friends because there were no rentals available. In some cases homes were uninhabitable for 18 months while the owners waited in line for builders. Others found that their insurance did not cover them for flood, leaving them to undertake their own repairs or sell the property due to loss of rental income. Some of the areas affected had been largely inhabited by elderly home owners, many of whom moved straight into aged care, with their houses going on the market in “as is condition”. I was poised and ready to find myself a bargain, however the bargains I thought I’d find didn’t happen. The “as is” properties sold for much more than I considered them to be worth under the circumstances. In the scheme of things, it didn’t take long for people to forget that these houses had been 2.5metres under water and they began paying much higher prices for them, once they were repaired and renovated because they not only looked “nice” but were in central location. These suburbs have continued to thrive in both capital growth and rental return. For more information on Property Women click here.
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