PROPERTY PRICES COULD FALL BY 35 PER CENT

Written on the 2 March 2011

PROPERTY PRICES COULD FALL BY 35 PER CENT

PROPERTY values in Brisbane's flood affected areas could drop in price by up to 35 per cent in the next 12 months, according to a Queensland University of Technology (QUT) property economics expert.

Professor Chris Eves, from QUT's School of Urban Development, has tracked property prices following major floods in Sydney and the UK.

He says history has shown that low-lying areas in low-value suburbs could drop in value by between 17 per cent and 35 per cent.

"The peak price fall will be at about the 12-month mark," he says.

"What we will see in Brisbane, like what we saw post the Sydney and UK floods, is that the first few months will be spent cleaning up from the floods. It is after this point that homeowners will need to re-evaluate their situation.

"Those that simply can't afford to rebuild, or are forced to sell, will be the hardest hit and that is where we will see property prices fall significantly."

Eves says the worst hit areas are the ring of suburbs surrounding waterfront homes.

"People who have bought riverfront homes have bought for the amenity, so they will weigh up the risk of flood against the amenity and the amenity will win," he says.

"When it comes down to the numbers, if you take out the time properties have been actually impacted by the floods between 1974 and 2011, for more than 99 per cent of the time these homes have been dry.

"The suburbs that will suffer will be the ones that don't have the river amenity but that are in the low lying areas."

The difficulty for sellers is that buyers are now extremely cautious of purchasing in flooded areas and will be for some time.

"It will be hard for sellers in flood prone areas to sell. Buyers will stay away and the only way to sell will be to drop the price,” he warned.

Eves says the good news is that people have ‘short memories’.

"In Sydney, after about four years we saw property prices return to normal," he says.

"Buyers will be extremely aware of the floods for the next few years but studies following both extreme flooding and bushfires have shown that people have short memories."

The banks have also devalued homes in flooded areas by as much as 10 per cent. It is estimated by the Insurance Council that close to 6000 homes were badly damaged by the floods in Brisbane.

Executive director of the Property Council of Australia Kathy McDermott does not expect the recent flooding to trigger a major fall in values.

“It is important to note in Queensland 0.5 per cent of houses had water over habitable levels due to the floods and only a fraction of these will be likely to sell. We expect minimal transactions and no significant drop in values, outside general market movements,” she says.

The worst affected suburbs include Newfarm; Rosalie; West End; Yeerongpilly; Bowen Hills; Indooroopilly; South Bank; and St Lucia.


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