OPINION: THE recent floods experienced around Australia are likely to have a profound and ever lasting impact on property values.
There is little doubt this will result in both winners and losers…
Whilst many Australians will seek to rebuild as soon as possible, the Australian Property Institute, expects city and shire planners, along with State government departments to take a harder look at where the flood water travelled and extend the boundaries of flood risk areas in many towns and cities. Its natural these authorities want to protect buildings and lives across the Country.
Those land owners whose property becomes included in these new flood risk area will suffer a double whammy from these floods. Having suffered damage from flood waters, some people will now face a fall in the value of their homes.
Most towns and cities have flood maps, but the extent of flooding has been so great, and ferocious that we are likely to see significantly greater parts of Australia identified as subject to flooding.
Warnings about the potential for flood inundation attaches to land when the land is sold, subdivided, mortgaged or built upon.
The API believes potential property buyers will be extremely wary about buying homes and land where it has previously flooded.
Banks may well change their lending policies, and not lend on flood affected areas, even if councils still grant a building permit.
There are going to be a lot of Australians who will lose significant value in their properties from these recent events, even if the improvements get reinstated by insurance.
Construction costs are also likely to significantly rise as a result of the floods.
After Cyclone Tracey in 1974, we saw Darwin rebuilt as “cyclone proof” and significantly more onerous building requirements were added to the building code. Victorian’s devastating 2009 bushfires are a more recent example of building requirements changing to meet Australia’s changing environment.
The API expects these more stringent building requirements will occur in areas where it has flooded around Australia. The fact is nobody wants to ever see again the distressing sight of houses detaching from their foundations and floating away.
The winners will be those on the high ground in towns and cities across Australia.
The API does not expect whole towns to suddenly become ghost towns, however, we do expect people to shift their buying decisions by favouring higher land, and where there are more buyers, prices will rise accordingly.
*Richard Bowman, Partner at Ernst and Young and spokesperson & chair of the Australian Property Institute – Vic Professional Board.
Australian Property Journal
