Whatever the fallout from the recent floods that primarily hit Queensland, but also affected other states, and the initial impact on the Australian economy, there’s unlikely to be a long-term detrimental effect on real estate prices – even for those homes sitting in some of the worst flood hit areas.
BY CATHERINE CASHMORE
The recovery after the Brisbane floods in 1974 bears remarkable similarity to the recent deluge and outlines yet again the unique resilience and ability of Australians to overcome disaster, pull together, and rebuild. As residents living in Goodna at the time recalled: "Nobody forced you to take in another family, everyone just did it. Hundreds of millions of dollars was raised throughout Australia."
Less than a year after the floods insurance companies criticised councils for once again allowing residents to rebuild houses in flood prone areas. They argued passionately that it was impossible for every insurance company to insure against floods without premiums rising considerably. A 1975 report compiled for the general insurance company stated, "the concept of insurance is founded on the principle of insuring against an unlikely event", however "flood insurance is generally a case of insuring against a certain event" and many insurance companies were simply not prepared to do that. However, despite the lack of appropriate insurance, buyers were not deterred from purchasing in the flooded zones.
In a recent interview, Brisbane’s mayor Campbell Newman cited conversations he’d had with locals who stressed their strong desire to rebuild despite risks of another wipeout. Premier Anna Bligh, anticipating an outcry over the sensitive subject of reconstruction, stressed no one would be forced to relocate homes to safer areas.
More likely are enforced changes to improve housing infrastructure – which will add value rather than diminish it.
Reports from some of the smaller flooded towns are also upbeat. Recent sales in Bundaberg show prices holding steady and Rockhampton is also reporting little downturn in buyer activity. Lessons learnt from other disasters tell a similar tale. Just over a year after the earthquake in the New Zealand city of Christchurch, buyers are once again competing for properties in what’s been described as a ‘tight market’. There would be few who remember the great Melbourne flood of 1934, which covered houses in suburbs as far inland as Richmond and Prahran, killing 18 and rendering 6000 homeless. Protection systems were developed to reduce the risk of re-occurrence, however the Environment Protection Authority have since stated that an event on the scale of the 1934 floods could cause failure of ‘existing systems’ which may lead to a disaster on a ‘greater scale’ than witnessed previously. It’s worth noting that this land falls in zones with a ‘flood inundation overlay’ – evidence of which is contained in the vendor statement of each property sold. However the zoning doesn’t deter prospective buyers, or deflate prices.
Home ownership continues to hold a special place in the Australian psyche. For Australians, it’s more than just the essential need for accommodation, it’s a reflection of the pride they hold inwardly over owning their own piece of Aussie land. A quote from the 1997 Australian film The Castle sums it up perfectly: "It’s not a house, it’s a home."
Australian’s don’t give up their houses easily – it’s one of the reasons house prices in Australia are more likely to stagnate for periods of time than drop. Most vendors will hold rather than sell in a downward market and the value Australian’s place on their property is heavy with romantic aspiration.
In 1942 Sir Robert Menzies famously said: "One of the best instincts in us is that which induces us to have one little piece of earth with a house and a garden which is ours". And in 1974 Gough Whitlam aroused similar passions in his ‘It’s Time’ speech, saying: "The land is the basic property of the Australian people. It is the people’s land, and we will fight for the right of all Australian people to have access to it".
This is why, more so than any other country, the larger proportion of Australians either own their own home, or hold a mortgage, with only 22 per cent of the population renting privately. A rising population and short land supply in the most populated areas surrounding our capital cities has done little to diminish that dream. Even with housing affordability at record levels and onward effects resulting from the global financial crisis, there has been little long-term effect on the market. So despite short-term blips in our economy, Anna Bligh’s words ring strong: "We are going to rebuild…" and "We are going to rebuild it bigger and better than it was before…"
Catherine Cashmore is a senior property adviser and buyer advocate for JPP Buyer Advocates – the largest dedicated buyer advocacy in Melbourne. With extensive experience in all matters regarding real estate, JPP successfully purchases and negotiates over $100m worth of property each year for clients. http://www.jpp.com.au