HOUSE prices in Queensland’s heavily flood affected suburbs will continue to be discounted in the short term. A new Australian Property Institute report found prices declined by more than 20% in areas where properties were completely inundated.
The API QLD Flood Report said almost 12 months following the natural disaster, the clean up continues in the hardest hit suburbs of West End, Rocklea, Graceville, Milton, St Lucia and Bellbowrie.
The report said the flood inundation of significant areas within Brisbane and further to the West, including Ipswich and the Lockyer Valley, has fundamentally impacted the Queensland residential property market.
At the peak of the flood, approximately 11,900 homes were completely flooded while a further 14,700 homes were partially flooded.
The report found since the flood there has been a significant diminution to both the marketability and value of the affected properties.
During 2011 there was limited stock coming onto the market. Within the Brisbane region, flooding impacted upon parts or all of the following areas, among others: Milton, Toowong, Auchenflower, Rocklea, Goodna, Ipswich, Yeronga, Bellbowrie, Booval, Oxley and Jindalee.
Many owner occupiers of floodâ€affected properties have decided to carry out repairs to the dwelling and sit tight for the medium term until the market starts to recover.
According to the API, there was a steady turnover of flooded properties, generally for properties in the entry level segment of the market. The owners of these properties were typically interstate or overseas investors who were unable to coordinate the required repairs and also felt that by the time they paid for repairs and factored in the lost rental income that it was easier for them to move the property on quickly. These properties were typically purchased by builders who had the resources to carry out the repairs.
Meanwhile owners of property not affected by flood waters have been reluctant to put their property on the market as they are concerned about the perceived negative sentiment.
Discussions with Brisbane real estate agents reveal there is still a strong negative sentiment towards flood affected properties with some agents indicating that approximately 70% of the market will not even consider looking at a flood affected property.
National house prices are reported as having fallen 3.4% and Brisbane house prices 6.1%. The Brisbane figure would include the impact of floods on those areas affected.
From the available flood sales data it would seem to indicate that there is a decline (after allowances for repairs) in value of:
· 0% †10% for properties where flood waters entered the site but did not affect living areas,
· a decline in value of 10% †20% for properties where flood waters have partially affected living areas depending on the level of inundation to the property and
· in excess of 20% where the property has been completely inundated.
The report also found there has been a limited amount of riverfront prestige properties in excess of $2 million coming onto the market in 2011. In the last couple of months some properties have come onto the market although there has been limited demand at present, despite the fact the properties are for sale often below replacement value.
The market within the flood affected properties is expected to remain subdued for the medium term. Whilst there is minimal demand in the general property market, the flood affected suburbs are likely to see lower levels of supply and limited demand.
In addition, properties in floodâ€affected suburbs have been taking an extra month to sell, which is not surprising considering the extra issues that would have to be addressed. The majority of properties are experiencing renovations to restore the property and remove the impact of the floods.
In the longer term, the impact depends on the risk of an early repeat of a flood event. As time goes by, and floods do not reâ€occur, as seems likely, history suggests that the discount will shrink, though not disappear entirely.
PropertyReview
