Over the past year, the property market performance in Sydney and across New South Wales’s North coast has experienced significant price growth, fuelled by record-low interest rates and migration trends.
However, there are growing worries that extreme weather events and climate change, particularly the current floods, will have a bad impact on the already slowing down property market. So is this really the case?
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THE BRISBANE 2011 FLOODS & THE HOUSING MARKET
In 2011, Brisbane experienced destructive floods that damaged and destroyed hundreds of homes in the city and the surrounding regions.
According to CoreLogic, following that one-in-a-lifetime flood, the city’s dwelling values fell by -6.1% between January 2011 and January 2012. The market fully recovered in March 2014.
However, according to CoreLogic’s head of research, Australia Eliza Owen, it’s hard to tell that the flood itself is the one to be blamed. From mid-2010, Brisbane housing value was already trending lower, triggered by a tight monetary policy amid a resources boom and Australia’s recovery from the GFC.
Based on historical data, in the 3 to 5 years following the flood, most suburbs, including riverside precincts, saw a recovery in price. This means that despite more frequent severe weather events, moving closer to the water is still an ongoing trend that is yet to be changed.
IT WILL TAKE MORE THAN RAIN TO DAMPEN BUYER DEMAND
Although some homes in both Brisbane and Sydney have been suffering from the flood, industry figures believe property prices are too resilient to falter.
Speaking of the current natural disaster, Ms Owen said that the most significant difference between the 2011 and 2022 markets is the length of time between these events. In 2011, major flooding had not affected the region since 1974, compared to the 2022 floods that occurred just 10 years after.
However, weather events will not control property prices, said Ms Owen.
“I don’t think extreme weather events historically have been enough to drive a correction in the housing market, especially seeing as extreme weather events reduce the amount of housing stock, and may actually put upward pressure on parts of tree/sea change markets that aren’t prone to flooding”.
Sources: abc.net.au
On the same note, Domain’s head of research and economics, Dr Nicola Powell, said that while property prices in the afflicted area could take a short-term loss, the current market will be resilient in the long run.
“There will be an impact – particularly if someone was flooded and they were looking to sell their home – but property prices are actually pretty resilient.” Dr Powell said.
WHAT WILL HAPPEN IN THE HOUSING MARKET THIS TIME?
For properties in highly prone areas, according to Ms Owen, there will be a drop in demand, and higher insurance premiums will be factored into the value. More focus will be placed on house insurance and elevating repair/renovation in the upcoming year.
Source: Forbes.com
Floods and storms, according to Marty Sadlier, director at MCG Quantity Surveyors, will likely cause a wave of underinsurance, costing homeowners thousands if not hundreds of thousands, of dollars.
“Recent weather has wreaked havoc on a huge number of property owners, but things could get even worse as many come to realise how woefully underinsured they are.” – Me Sadlier said.
“Prior to the pandemic, insurance council numbers suggested 83 per cent of owners were already underinsured. We now believe the percentage is far higher”
OPPORTUNITIES PRESENT FOR BUYERS
In the short term, buyer attitudes around housing in low-lying areas will also be shifted. However, this won’t last for long.
Ms Owen said although extreme weather events could impact demand, the popular suburbs with high liveability are still performing well.
“Popular tree change and sea change markets, like the Blue Mountains, Newcastle, parts of Tasmania, where temperate climate, high elevation and fewer incidence of extreme weather events, will still be in high demand over the long run.”
Therefore, as buyers and investors hesitate to buy, some heat will be released from this highly competitive market. For buyers who have been hunting for a property, such once-in-a-lifetime events could present some opportunities to get an early step into the market.
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