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Flood-affected property markets to recover within 12 months

Flood-affected property markets are likely to bounce back within 12 months, according to an expert.

After a year that saw a number of locations around the country severely impacted by flooding, there’s hope that real estate values will recover.

Suburbanite Principal, valuer and market commentator, Anna Porter said there’s light at the end of the tunnel for flood victims.

“The good news for those unfortunately impacted by the floods both past and present is that the market absolutely bounces back,” Ms Porter said.

“It’s not instant, because after a flooding event, the market goes into a holding pattern as there is a period of time post flood that the banks are too nervous to lend on properties with flood risks and insurance companies are afraid of insuring properties that fall into a flood risk category.

“This holding pattern continues whilst the banks and insurers work out the approach they want to take, so transactions are minimal for a period of time.”

Ms Porter said this was evident in Queensland where insurance companies placed an embargo on flood-affected areas until they could get a handle on what they would and wouldn’t insure such as which policies would cover floods in affected areas.

“In some instances, the insurer will price in the flood risk and charge more for cover in these areas or exclude flood cover altogether,” she said.

“So buyers do need to do their due diligence when buying in a flood-affected area, especially after a major flood event.

“But all-in-all, the market will eventually absorb this and the housing values bounce back to normal levels.”

According to Ms Porter, insurance companies and banks first work out what they can and can’t lend on or insure and then the market begins its recovery.

“Buyers and the market as a whole are quick to forget, which allows values to reset and the market to move forward again,” she said.

“Market values return to usual strength within around six to 12 months because the market forgets how bad the impact was and what streets were affected.

“Aside from this, properties with too high risk often go into a voluntary buy back scheme with the local council or state government as, if people’s lives are at risk, council will often buy back and repurpose the site to something like a park as opposed to residential housing but this can take 6-12 months.

“A land swap and buy back scheme is currently in the works under the Perrottet government to support those affected by the 2022 flooding in Lismore and Northern NSW.”

Ms Porter said the scheme is similar to one rolled out by the QLD government in 2011 where there was also a federal investment.

She said these schemes protect houses where values will be most heavily impacted as owners will get fair market value under a buyback scheme. 

The current scheme is expected to cost the state government upwards of $500 million.

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Rowan Crosby

Rowan Crosby is a senior journalist at Elite Agent specialising in finance and real estate.