- In Sydney, flat low-lying areas in southwest and northwest Sydney along the Hawkesbury-Nepean and Georges River systems tend to be the most affected by flooding
- Buyer hesitancy has been reported in flood-prone areas, according to agents 'on-the-ground'
- Melbourne has been immune from major flooding, however, this may not last
Over the past few years, flood events have caused devastation across several major Australian population centres.
REINSW CEO Tim McKibbin has said he expects natural disasters, such as flooding, to have a significant impact on the property market this summer.
Of course, the causes, levels of inundation and impacts from flood water are particular to each region.
Herron Todd White has released a new report featuring commentary from various team members on-the-ground to highlight how flooding is affecting their respective property markets across Australia’s cities, towns and suburbs.
New South Wales
In Sydney, flat low-lying areas in southwest and northwest Sydney along the Hawkesbury-Nepean and Georges River systems tend to be the most affected by flooding.
This year, however, other areas have also been affected by flooding events. This has included Woronora in the Sutherland Shire and intense flash flooding on the Northern Beaches back in March.
Sydney Herron Todd White Director Shaun Thomas said some buyer hesitancy has been reported from agents in flood-prone areas along the Neopamn and Georges Rivers, in particular, Camden, Chipping Norton and Menangle.
“However, we have not yet seen any clear indicators in the sales evidence or any mass exodus represented in significant increases in stock levels,” noted Mr Thomas.
“This may take time as property is a slow transacting asset but we suspect some of the negative impacts will be absorbed by the already softening Sydney property market.”
Mr Thomas did add that, if history is anything to go by, the property market remains resilient.
He noted that if there is a dip in prices, this shock is temporary and prices gradually recover in the long term. A textbook example of this, he said, was the Brisbane floods in 2021.
“Greater Brisbane prices dropped 6.1 per cent after the floods but recovered within 3.1 years,” said Mr Thomas.
“Rocklea, which dropped a staggering 17.4 per cent, recovered its value within 3.7 years. People have an innate desire to live near water and we tend to have short-term memories when it comes to infrequent events, taking an overly optimistic view that flooding won’t ever happen to us.”
Shaun Thomas, Herron Todd White
He reiterated that this isn’t to say there will not be any physical or financial risk in these areas.
“It is clear that climate change has increased the severity and frequency of these flooding events,” he said.
“We suspect what will play a bigger role long term though is the cost of insurance in these parts. As newer flood studies and maps are conducted by councils, including the increasing changes in the climate, we could see an increase in insurance costs for frequently flooded areas, which will have an overall dampening effect on property prices.”
He recommends all owners to thoroughly go over their insurance cover if they are buying in or close to flood-affected areas.
“Overall, while it’s difficult to assess the effects the floods have had on the property market as yet, what we can say for certain is that people are resilient, optimistic and have short-term memories, with more of the latter for some of us,” he added.
Mr Thomas noted that Southern Sydney is usually fairly safe from major flooding events, however, there are some low-lying areas and riverside suburbs. This includes Woronora and Bonnet Bay within the Sutherland Shire.
Woronora is interesting in particular as prices have dipped slightly according to heatmaps.com.au – by 3.22%, whereas almost all surrounding suburbs have increased from 2021 to 2022.
The report noted that 2022 has brought unforeseen challenges, with La Nina impacting the Central Coast region with not one but two prominent flooding events; one in March and the other in July.
“The extent of flooding was region-wide with our lakes systems overwhelmed by the body of water flowing from upstream in the local estuaries,” noted Todd Beckman Associate Director for Herron Todd White Central Coast.
“Tuggerah Lakes was adversely affected with rising flood waters inundating homes along the lake front and reserves. The properties affected were identified as being in flood risk areas, however much of the housing in these areas is older style homes built prior to the introduction of tighter building regulations when building in flood risk areas.”
Other areas impacted include the rural areas of Wyong Creek, Dooralong, Jilliby and Cedar Brush Creek.
“The area is serviced by many creek systems along low-lying flood plains generally used for agriculture and agistment purposes,” he added.
“The recent floods saw the creek systems swell in parts, causing flooding over local roads and through vast paddock areas. Reports of flood water inundation to homes were to a lesser extent than along the lakes systems, however the flood waters cut off roads for prolonged periods and electricity was also cut off for days.”
Mr Bechman noted that market transactions in these areas are yet to filter though, and therefore it is too early to conclude the effects on the local property market.
“Historically buyers have been cognisant of flooding issues in these areas, however the most recent flood events have brought it more to home buyers’ attention.
“As the year progresses and we move further away from the flooding events, the effect if any on market values will become ever more passive until the next flood event occurs.”
Victoria
Although the threat of flooding is one that has been more prevalent in Queensland and New South Wales over the past couple of years, as climate change continues to make an impact, Melbournians may see this threat upon them much sooner than expected.
After all, floods cause more damage than any other natural disaster in Australia.
Perron King, Herron Todd White Director, noted that inner Melbourne and the south-eastern suburbs, including the Mornington Peninsula, have been fortunate to have suffered from many flooding issues.
“However, according to a report by The Sydney Morning Herald, up to 1.6 million Australian homes are currently in moderate to high risk from extreme weather conditions and forecast to increase by more than 60 per cent by 2050,” said Mr King.
“Some of the most affected areas in the Melbourne CBD are are Port Melbourne and Albert Park and in the south-east, Seaford and Carrum. An estimate of up to 6375 properties in Port Melbourne will be at high risk by 2050, according to the ABS.”
Perron King, Herron Todd White Director
Mr King noted that while most inner city and south-eastern suburbs have no history of major flooding, careful consideration and preparation are needed for the future.
“Melbourne’s eastern suburbs have been fortunate not to be severely impacted by any major floods in the past twelve months.
“Instances of flash flooding have occurred but have not caused any major dramas, however consideration should be given to the future of the environment and climate change and how this may impact your property.”
Outside of Melbourne, the flood has been severe and looks likely to be ongoing in Echuca.
Echuca and Moama Herron Todd White Director Graeme Whyte said that, fortunately, there has been limited damage to houses and commercial businesses.
“The bigger issue surrounds the local economic impact. Echuca/Moama relies heavily on tourism with this sector severely impacted,” said Mr Whyte.
“The Murray River is currently closed to boats, most caravan parks have been affected and are empty and there has been extensive crop damage and stock losses in the surrounding region.
“We anticipate longer selling periods for both residential and rural properties due to the economic uncertainty and a stigma around flood-affected areas. There are also significant road closures and access issues surrounding flood-affected towns that will continue for coming months.”
Queensland
Given Brisbane is known as the “River City” and with hectares of suburban housing on land designated as floodplains, it shouldn’t be a surprise that floods are part of the historic fabric of the property scene in Brisbane.
Herron Todd White Brisbane Director David Notley noted that the 1974 flooding in Brisbane is still used as the benchmark event.
“Of course, 1974’s significance has paled somewhat in comparison to more recent flood events,” he said.
“So, we are adept at dealing with floods and their impacts, clean-up and rehabilitation. In terms of their effect on real estate prices and sales activity however, the fallout from flooding is uncertain and nuanced.”
When discussing 2022, Mr Notley noticed that most of the flood impact at the beginning of the year was from the river into higher-value suburbs where water breached the banks. This included areas such as Graceville, Chelmer, Sherwood and Yeronga.
“We have witnessed a lot more sales transacting in the lower value areas such as Rocklea, Bundamba and Oxley this year where the underlying land value isn’t as high,” he said.
“As such, the cost to repair improvements is relatively affordable compared to rebuilding. That said, owners are more inclined to sell in these cheaper suburbs as often they can’t afford the rebuild and holding costs.
David Notley, Herron Todd White
“Also, at these lower price points, the end value of the property hasn’t been impacted as dramatically in dollar terms compared to more expensive areas.”
Mr Notley said this story is different to high value areas, where owners typically have more funds at their disposal.
“Many have been able to afford rectification of the damage,” he said.
“These owners are also more inclined to hold onto the property when prices take a hit, hoping future capital gains will make them whole in the long term.
“As a result, there are fewer sales of flood impacted properties in areas such as Chelmer, Graceville and Yeronga. Flood impacted properties that do hit the market in higher priced suburbs have seen a dramatic dollar drop in their values.
“Purchasers are factoring increasing knockdown, rebuild and holding costs into their offers. In some cases, when you work backwards from the ‘as if rectified value’ and allow for all these costs, the end figure comes in below the market value of the land.
“There is no getting around the fact that rebuilding in these areas is very expensive right now.”
In summarizing this, Mr Notley said that those who have insurance are generally keen to rectify any issues with their home. Those without adequate insurance are likely to ‘cut-and-run’.
“But, important determining factors will include the extent to which your property was inundated and where it sits in terms of price point. More expensive homes are likely to be retained while affordable properties are more likely to be listed for sale.’
