Time will heal us
AS homes slowly dry out across the state, property owners will not only be counting the costs of restoring their homes (some even replacing) but they will be coming to terms with the impact on their property’s value.
Properties that have been inundated with water will undoubtedly face a stigma in the market, at least in the near future, but experts like CQUniversity’s property lecturer and registered valuer, Ian Clarkson, are confident the Queensland property market will eventually come back on top.
However for now, first home buyers who have borrowed close to 100% of market value will be the hardest hit as values take an immediate dive, forcing them to absorb the costs and stay put or face the fate of bigger losses. More experienced property buyers are expected to cope better and should be able to ride the property cycle.
Clarkson - who is a Fellow of the Australian Property Institute - believes despite this immediate price crunch, history shows us that memories fade and property values will eventually recover to some extent.
“As any economist, and anyone purchasing vegetables at the moment understands, when demand is high and stock is low prices rise, but the lower demand for flood areas immediately post-flood tends to force prices to fall to meet the market.”
He said other factors that will play their role in forcing values down will include the implication of property damage, lack of affordable insurance and a potentially tight credit market where banks may not be as keen on risky properties.
“Two things will negate the stigma of flood areas. One is time - as people generally diminish pain and problems with time, so do we forget. New people are bound to move into these areas looking for affordability and not fully understanding the implications of flood. The second is a market push or boom. People begin to seek out dwellings with an affordability focus ... this is when flood areas become interesting again. Investors can also be attracted to post-flood properties as a lower purchase price may mean higher returns on their investment, although with an inherent risk.”
Rockhampton’s recent history, post the 1991 flood, paints a pretty good picture of what regional Queensland can expect with property values. Long-serving real estate agent, Pat O’Driscoll, remembers the period that followed that flood and the eventual boom that saw flood-affected suburbs like Depot Hill become hot property. In 2006 more than a third of the suburb was owned by investors.
“With the depth of industry growth within the region over this next decade, the demand for property throughout Central Queensland is expected to increase significantly in the short to medium term. With the need for both rental properties and owner-occupied homes during the expansion phases of the coal and gas industries... we anticipate a strong real estate market with increasing demand from all areas of Australia and beyond,” he said.
Managing director of the Real Estate Institute of Queensland Dan Molloy is also holding hope that Brisbane and surrounding regions recover quickly, saying although it is still too early to tell with any level of certainty what effects the recent Queensland floods will have, we can take some heart from how the market reacted after the Brisbane 1974 floods. In these post-flood times, Molloy believes Queenslanders should be confident in their property investments.
“While the next few months may result in a subdued market, we need to remember that hundreds of thousands of homes were not affected by the floods which should reassure homeowners and investors that the viability of the Queensland property market remains sound. As the rebuilding phase takes shape, and with it much-needed financial stimulus into our economy, the REIQ envisions that the property market will prove resilient as it did 37 years ago,” Mr Molloy said.