More and more research is being published which suggests that flooding in Australia is on a long term trend to get worse and we report on several papers in relation to that in this month’s issue. It is in this context that I find some statements made around flooding in Brisbane somewhat disturbing.
One of our articles this month reports that house prices in the most flood prone suburbs of Brisbane are growing at up to twice the rate of other suburbs. That is not really surprising. Firstly, because these house prices plummeted following the 2011 flood and so are coming up from a lower base but secondly, because decades of research shows that in the long term flood affectation has little impact on house prices. This is why fear of impact on property prices should not be a deterrent to making the full range of flood affectation of every property publicly available.
The research shows that flood notifications on property titles has little impact on house prices, particularly in cities, because there are so many other considerations which affect the occupants every day (proximity to shops, transport, schools) and these have a greater influence on what they are willing to pay. The biggest impact flooding has on property prices is when an actual flood occurs and over time that has a diminishing influence. That is what the sales data from Brisbane is showing, and even insurance premiums of more than $10,000 are not putting people off from paying millions of dollars for waterfront properties.
I don’t have a problem with people buying flood prone properties if there is not a significant risk to life and they have made an informed decision about the financial risks. However, they can only make an informed decision about financial risks if they have accurate information. Publicly available flood notation on every property up to the probable maximum flood level will go some way to doing that. Insurance premiums which accurately reflect the risk will be another measure.
However, it is the misinformation peddled by sales people which disturbs me. For example, the article in The Real Estate Conversation which we reference has agents making statements such as:
“it’s quite unlikely that Brisbane will see another flood like the 2011 one…If you consider the fact that another one in a hundred year flood happening again is very low, you can see why buyer perceptions have shifted,” – the reality is that the 2011 flood was closer to a one in fifty flood than a one in a hundred flood and there were three floods bigger than it in the previous 170 years including two rarer than a one in two hundred event.
“If you look at the context in which the floods occurred, it was more or less man-made by releasing the water from Wivenhoe Dam too quickly. The irony is they built that dam to protect Brisbane from flooding, but that’s exactly what ended up causing it.” – the reality is that the 2011 flood had a greater discharge than the 1974 flood but reached a lower level in Brisbane because of Wivenhoe Dam. While timing of dam releases had some influence on final levels, the dam lowered them compared to what would have been the case without any dams.
“Given that the previous flood was created by humans,not too many buyers are concerned it will reoccur. The Wivenhoe Dam operators have been sued massively, there are huge litigations and class action taken against them, so I don’t think they’ll make that mistake again,” -the reality is that while there is a class action against the operators of Wivenhoe Dam regarding the timing of dam releases and their contribution to final flood level, to suggest that the dam could be operated in such a way that Brisbane would not have flooded or that operating the dam caused all the flooding is fallacious.
I suppose, as with any purchase, buyer beware.