After unprecedented flooding events and more on the horizon, many may be wondering what happens to the property market.
Is it doom and gloom for flood affected areas or do they bounce back?
According to Suburbanite Principal, valuer and market commentator, Anna Porter, there’s a light at the end of the tunnel for flood victims.
“The good news for those unfortunately impacted by the floods both past and present is that the market absolutely bounces back,” shares Porter.
“It’s not instant because after a flooding event, the market goes into a holding pattern as there is a period of time post flood that the banks are too nervous to lend on properties with flood risks and insurance companies afraid of insuring properties that fall into a flood risk category,”
“This holding pattern continues whilst the banks and insurers work out the approach they want to take so transactions are minimal for a period of time.”
Porter reflects on a recent occurrence of this in Queensland where insurance companies placed an embargo on flood affected areas until they could get a handle on what they would and wouldn’t insure such as which policies would cover floods in affected areas.
“In some instances the insurer will price in the flood risk and charge more for cover in these areas or exclude flood cover altogether. So buyers do need to do their due diligence when buying in a flood effected area, especially after a major flood event. But all in all, the market will eventually absorb this and the housing values bounce back to normal levels.”
Rest assured, over time insurance companies and banks work out what they can and can’t lend on or insure and the market returns to its usual swing.
“Buyers and the market as a whole are quick to forget, which allows values to reset and the market to move forward again,” shares Porter.
“Market Values return to usual strength within around 6 to 12 months because the market forgets how bad the impact was and what streets were affected.”
“Aside from this, properties with too high risk often go into a voluntary buy back scheme with the local council or state Government as if people’s lives are at risk, council will often buy back and repurpose the site to something like a park as opposed to residential housing but this can take 6-12 months,”
“A land swap and buy back scheme is currently in the works under the Perrottet government to support those affected by the 2022 flooding in Lismore and Northern NSW,”
“This scheme is similar to one rolled out by the QLD government in 2011 where there was also a Federal investment.”
These schemes protect houses where values will be most heavily impacted as owners will get fair market value under a buy back scheme. It is earmarked this scheme will cost the state government upwards of $500 million.
Above all, there is an overall general mass shortage of housing in Australia so values will always be supported regardless of flooding.