How Will the 2022 Floods Impact the Real Estate Market in Queensland?
The recent severe weather events have devastated communities across Queensland. Thousands of homes have been inundated by the floods with a death toll of 13 people as a result. So exactly how have these floods affected us? We look at our top four (4) impacts of the 2022 flood events on Queensland.
- Clean Up & Economic Costs
With more than a years’ worth of rain in three days, authorities have indicated the severe floods also created a year’s worth of waste destined for landfills in just a few days. This waste however was and still is scattered throughout our suburbs with a huge clean-up to remove these items still in progress. Additionally, the Brisbane River is littered with debris, wrecked boats, pontoons, even houses that require removal for a safe river system again. Boats have only just now been given the go-ahead to return to the water with caution.
More than 20,000 homes and businesses across the southeast alone have been affected. We saw defense force troops engaged to help clean up homes and businesses in Gympie, Gatton, St Lucia, Fairfield, Graceville, Rocklea, Esk, Gatton, Grantham, and Goodna.
Floodwater is often contaminated by overflowing sewerage or septic systems, and agricultural or industrial waste and chemicals. Therefore, there is a higher risk of infection after encountering polluted water or soil. Clean-up is not just simply removing destroyed items but decontaminating areas and items that the flood has encountered.
Premier Annastacia Palaszczuk initially estimated the flood damage bill could total up to $1 billion. Treasurer Cameron Dick further added that the cost of repairing public infrastructure like roads, bridges, railways, and ports that were damaged will be about $500 million alone.
The South-east Queensland flood damage bill has since been revised to cost up to $2.5b.
Mr. Dick said “This weather event will impact our economic growth in Queensland by one-quarter of one percent” or $1 billion in economic activity, during the current quarter with the economic impacts of the flood crisis being felt for the next couple of years…”
- The Rental Market
The State’s rental market before the 2022 floods was already under pressure with rental vacancies down 65% compared to January last year. This has mainly been due to undersupply of properties because of the Covid pandemic.
The recent flood catastrophe will see many families without a home due to their current home being flood destroyed or damaged – thus requiring short or mid-term rental accommodation whilst their homes are being rebuilt or repaired.
“With people displaced, that will only put more pressure on stock and prices, for both buyers and renters, especially in areas that were not affected,” said Angus Moore from REA Group economist.
Two of Brisbane’s biggest real estate franchises – Ray White and Place – have collectively deemed more than 200 rental properties uninhabitable and hundreds more partially damaged, meaning that rental stocks are only going to get tighter.
A tighter rental market may lead to increased rental returns. However, due to the disaster caused by the floods, the Government is asking those who have Airbnb (or similar) properties to open their homes to longer-term accommodation options for families in need during this time and adjust their pricing accordingly – but will they?
A tight rental market is predicted to remain for some time to come.
- Re-Building Costs
Building costs have been on the rise over the past year. Marty Sadlier, director at MCG Quantity Surveyors, saw building costs skyrocket after the start of the pandemic. Increases in steel and copper prices, as well as timber shortages, are attributed to the increase in costs along with labour shortages.
Steel suppliers have increased prices by more than 20% since October 2021 and lead times to secure some products are increasing. Lead times on timber have now grown past 6 months and therefore suppliers won’t guarantee to price that far in advance, making it difficult for builders to accurately quote for jobs.
Taking into consideration the remedial work impact of the latest floods, repair, and renovation costs are expected to rise further given the already increased building costs and the high demand and shortage of labour and materials. This may mean timeframes for rebuilds are longer than anticipated and a significant rise in building costs.
- Property Values
PRD Chief Economist Dr. Diaswati Mardiasmo concurred, “the floods might temporarily shake market confidence, Brisbane had seen extraordinary property price growth since the onset of COVID-19.”
The experts think that the Queensland real estate market will stay resilient, with interstate and overseas buyers still on the rise after recent floods and with borders fully re-opening. There is also industry confidence that any post-flood downturn will be short, followed by a quick recovery.
Ray White New Farm principal Matt Lancashire has also seen increased interstate and international buyer activity leading to a handful of multi-million-dollar sales in the past few weeks alone. “Now 50 percent of our buyers are locals, and the other half are interstate or international.”
Furthermore, the Federal and State Governments have made huge investments in Queensland for infrastructure and associated projects. This coupled with the upcoming 2032 Olympic Games will encourage growth in the local real estate market despite the recent floods.
Domain Head of Research and Economics, Dr. Powell stated, “There will be an impact on people looking to sell their house after the flood, but property prices will maintain resilience because ultimately it is the land that holds the value which will maintain resilient property prices.”
Whilst we saw a property recovery period of three to five years for flood-affected areas post the 2011 floods, it appears the same is not happening this time around, with auctions directly after the floods, in flood-prone areas, still exceeding sellers’ expectations.
Whilst we truly won’t know the real impact of the floods for some time yet. With Covid now forming part of our everyday lives, a strong interstate market, plus 17 flood mitigation projects in the pipeline and potentially more to come, we remain optimistic for the road ahead – particularly in the real estate industry.
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