There has been a lot of discussion recently about what affect the floods in South East Queensland and along the east coast of NSW will have on the property markets that have been affected by the extraordinary rain bomb.
Certainly, there will be an impact felt but will it be enough to knock booming property markets off their upward trajectory long term?
I don’t think so – for reasons I will explain.
In the short-term price growth may slow in those affected regions as everyone absorbs the impact of what happened. There is an inevitable psychological impact.
So let’s look at Brisbane as one of the most high-profile areas to suffer a flooding crisis.
There was so much momentum behind the market before the floods hit, with Brisbane leading the nation on price growth for multiple strong reasons, that I expect any downward affect on prices will be short lived.
The floods have clearly been devastating to the families who have lost everything and we can never forget that multiple lives have been lost.
However, looking at the broader consequences for real estate markets, we need to remember that Australia is a country where natural disasters are regular events and Australians are very resilient as individuals and as communities.
They band together, clean up and try to get on with things as quickly as possible – supported, we hope, by the various levels of government.
Brisbane was leading the nation in terms of price growth before the floods, and I think that we’ll see it back up there again before the year is out.
History tells us the market will always bounce back and usually quite quickly.
After the Brisbane floods in 2011 property prices dropped a little but returned to steady growth in the following five years. That happened at a time when the Brisbane market was generally in decline, a trend exacerbated by the floods – yet the price decreases were quite minor and short-term.
I think this time the recovery will be faster and more emphatic because there is just so much demand and rising momentum in Brisbane, generated by its relative affordability, its overall lifestyle, a big infrastructure spend, the prospect of the 2032 Olympics and the re-opening of state and international borders.
From the figures I have seen 15,000 Brisbane homes have sustained flood damage, which is less than 2% of homes in the Greater Brisbane area.
This means that most of the city’s homes have not been directly impacted.
Rather remarkably, auctions still went ahead in Brisbane over the past two weekends, despite the severe weather, and properties continued to sell at record prices, even in flood-affected suburbs. Auction clearance rates of 70% or better were achieved during those two weekends.
We’ve also seen rapid recovery in other markets which have been devastated by storms and floods in recent years.
Gympie, a little north of the Sunshine Coast, has had a series of major flooding events in the past decade but house prices have increased 50% over the past five years.
Townsville in tropical North Queensland had one of its worst ever storm and floods disasters in 2019 but produced moderate growth in house prices in 2020 and price rises above 20% in many suburbs in 2021.
Moree in north-western New South Wales is perhaps the most noteworthy example.
It made the news nationally in March last year with major flooding. But relatively few homes were impacted and in the 12 months since those floods the median house price has increased by 41%.
Those examples suggest that flood-affected property markets can still boom when there are significant growth drivers in the mix, strong enough to be more influential than the negative impact of weather events.
In the case of Moree that includes major infrastructure spending – specifically the $15 billion inland rail link which is under construction in that area.
In the case of Brisbane, the positives that were driving the current boom are strong enough to overcome the psychological impact of the floods.
There will be some notable outcomes of the weather event, which can be seen as positives, depending on your individual viewpoint.
The Brisbane rental market, which was already under significant stress, because of ultra-low vacancies, causing rents to rise – will undoubtedly feel even more upward pressure on residential rents.
There will also be further pressure on the cost of building new homes, because the existing shortages of materials and tradespeople will be exacerbated by the recovery effort in the aftermath of the floods.
One positive outcome that will come is the mini economic boom which events like this cause as a result of the recovery spending.
Various levels of government will pump money back into repairing infrastructure and home owners will spend their insurance payouts on repairing or rebuilding homes.
There will a flurry of economic activity in the coming months, boosted even further by the looming Federal election, which inevitably will cause higher levels of generosity than might otherwise be the case.
And here’s a final thought – for those considering buying an existing property in Brisbane, this might be a good window of opportunity to do so.
The market might be less competitive for a short period of time while Australia absorbs the impact of the rain bomb and its aftermath, before getting back to business as usual later in the year.
