14 Mar 2022

Brisbane house prices predicted to bounce back after flood-induced fall

Brisbane property values could immediately drop if the market mirrors the experience in 2011, when the city last experienced a major flood event.

But agents and property analysts say they are confident any downturn will be short, and followed by a quick recovery.

A recent report by property data organisation CoreLogic showed Brisbane's dwelling values took several years to recover after a price drop following the 2011 floods.

The report showed that Brisbane's property values fell by 6.1 per cent between January 2011 and January 2012 and did not fully recover until March 2014.

CoreLogic's Eliza Owen said it was difficult to isolate the impact of the 2011 disaster flooding on property values as they were already trending lower from the middle of 2010.

"This decline was triggered by a tightening in monetary policy amid a resources boom, and Australia's recovery from the GFC (Global Financial Crisis)," Ms Owen wrote in the report.

The report showed that in the worst-affected suburbs property values took between three and nine years to recover.

According to the report, after the 2011 floods, the steepest drops were reported in Chelmer, Rocklea, Graceville, Yeerongpilly, Fairfield, Fig Tree Pocket, Indooroopilly, and Kenmore.

Chelmer took more than eight years to recover from a drop of almost 18 per cent, while Kenmore took around three years to bounce back from an 8.5 per cent fall.

Summary of downturns - Greater Brisbane versus select suburb dwelling markets:

 

Years for values to recover to Jan 2011

Jan 2011 to trough

Chelmer

8.4

-17.9%

Fairfield

4.0

-11.2%

Fig Tree Pocket

3.3

-9.3%

Graceville

3.8

-12.7%

Indooroopilly

9.1

-10.3%

Kenmore

3.2

-8.5%

Rocklea

3.7

-17.4%

Yeerongpilly

5.3

-12.8%

Greater Brisbane

3.1

-6.1%

Source: CoreLogic

"Most suburbs saw a recovery in prices within three to five years, with riverside precincts still attracting premium values over areas located further from the river," she said.

Ms Owen said the short time frame between the 2011 floods and those experienced this year could shift buyer attitudes around housing in low-lying areas.

She said properties not affected by flooding could attract greater demand, and more broadly the floods could result in higher insurance premiums and elevated repair and renovation costs in an already stretched building industry.

'Extraordinary momentum' slows

Before the most recent flooding, real estate research analyst Terry Ryder said Brisbane was leading Australia in annual property price growth.

Prices rose 8.5 per cent in the quarter to December 31, 2021 — the strongest growth of all states and territories.

Mr Ryder said the disaster may have a "psychological impact" on people who were "poised to buy" in the city, but he believes the market will recover quicker than it did following the 2011 floods. 

"It will take time for the market to absorb the impact of this, but I think ultimately there will be recovery and Brisbane will march on. There was extraordinary momentum behind Brisbane as a city and as a property market leading into this," he said.

Mr Ryder said large spending by the government on infrastructure projects and associated projects coupled with the upcoming 2032 Olympic Games would likely encourage growth again, and the flooding could actually spark a "mini-boom" in the local economy.

"Ironically, it [a natural disaster] can precipitate an economic boom or a mini-boom, because people who are impacted receive the insurance payouts and spend money on recovery, renovation, and rebuilding," he said.

"Governments also need to spend big, too, as part of the recovery effort and also to invest in better infrastructure to perhaps mitigate against that happening the same way in the future."

Mr Ryder said the recent flooding was likely to take some of the competitiveness out of the property market.

"Brisbane had been incredibly competitive, with property selling very quickly for higher-than-expected prices," he said.

"A little bit of that heat is going to be sucked out of the market because of what's happened. That's perhaps an opportunity for people who are planning to buy in Brisbane to buy with less competition."

'Lifestyle precincts' in demand

Property strategist Brett Warren said in 2011 the country was coming off the back of the GFC and as such the property market was already a little bit "unsteady" and buyers 'nervous".

"I think the standard variable interest rate (in 2011) was north of 7.5 per cent, so quite an exceptionally high interest rate," Mr Warren said.

"Demand is at record levels, the highest it has been in about 15 years, so I don't see that going away, but I think people are going to be more careful of where they buy."

He said demand for elevated properties was likely to rise, but the value of river frontage properties that flooded, would soon recover.

"People want to get into these lifestyle precincts. I think there could be some short-term upheaval in the next six or 12 months, but in the longer term you'll find that those kinds of suburbs will continue to dominate and outperform over the long run," he said.

"Property can be a forgiving asset in the longer term — I think that's what a lot of people understand. I think the majority of people won't want to sell at the bottom when the flood negativity is surrounding the property."

A 'fairly immediate dip'

Antonia Mercorella from the Real Estate Institute of Queensland said based on previous flood events around the state it was likely there would be a "fairly immediate" dip in the sale prices for flood-affected properties.

"History has shown that we have a resilient property market, and there is still incredible demand for housing, and now a significant proportion of available stock will be taken out of both the sales and rental markets," she said.

"We may find that sale prices and rents increase due to diminished stock levels. Additionally, unaffected suburbs may affect premium prices due to their 'safety' appeal."

Ms Mercorella said it was difficult to predict how the natural disaster would affect demand, growth, and consumer confidence.

"What makes it even more difficult to predict, is that in some cases, the flood-affected suburbs are actually among some of the most prestigious pockets and there will always be a desire to live in inner-city suburbs or waterfront on the river," she said.

SOURCE: https://www.abc.net.au/news/2022-03-07/qld-south-east-queensland-floods-house-prices/100882770

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