By Graeme Salt
According to new research by PropTrack at least 70 per cent of homes in flood zones have experienced a reduction in property value as a result of flood risk.
On average, this equates to a $37,000 drop in property values across all dwellings. Collectively this equates to a loss of $42.2bn in potential home equity.
This value gap isn’t confined to regional floodplains. It spans the housing market, from the Northern Rivers and Brisbane’s western suburbs to affluent waterfront Gold Coast postcodes. According to PropTrack, in some high value areas, the gap well exceeds $500,000 per home.
Since 2000, flood prone properties have recorded cumulative price growth of 394%, compared with 416 per cent for flood free properties – a 22 percentage point difference nationally.
For a homeowner with a $1 million property, that’s a potential $220,000 equity shortfall that creates a quiet but widening divide in household balance sheets.
From 2010 to 2025, homes at risk of flooding in some regions have recorded even larger growth gaps, in some cases underperforming up to 48 percentage points compared to homes without flood risk. Over 15 years this could mean close to $900,000 in forgone equity accumulation for a $1 million property.
Of course, it does mean that if you want to buy a property, flood prone sites may offer more bang for your buck – even if it comes with greater risk.
So, what should you do?
Forewarned is forearmed and here there are a few people to talk to:
- Mortgage brokers understand how banks view flood-prone properties
- Valuers can compare your intended purchase with the wider market
- Insurance brokers can talk about the likelihood and impact of floods
Climate change may mean that floods have bigger impacts on the property market going forward. So, its worthwhile talking to an expert before putting in an offer.
Graeme Salt is an award-winning mortgage broker. For a no-obligations consultation on your home loan needs please contact him on 02 9922 5055.
