Could Brisbane floods reverse its booming property market in 2022?

By PK Gupta
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Photo by ROMAIN TERPREAU on Unsplash

Brisbane house prices will take a dip in the coming months, but the property market is resilient, so the demand is predicted to bounce back

If you were poised to buy a property in Brisbane or have one, then you might be a bundle of nerves these days. Large parts of Brisbane have flooded, and the question on everybody’s mind is how will it affect the property prices in Brisbane in the coming weeks and months? Will the real estate market in Brisbane continue to boom, or will it fall, or will it be somewhere in the middle? I will use a data-driven approach to explain the most likely outcome.

Let’s look at the first chart that explains the severity of the 2011 disaster flooding, which was the biggest. So, you can see that flooding is not a new phenomenon for Brisbane, and in the 70s, there was a much bigger flood.

Maximum recorded gauge height on the Brisbane River at the Brisbane City gauge for significant flood events // Source: Macquarie University

The good part is that the current floods are somewhere around the moderate territory. I know what you see in the media, especially in Melbourne or Sydney, differs from what I am writing. The media kind of makes you believe that most parts of Brisbane are submerged in floodwater. I am sitting in a suburb that the media says is underwater, but it is bright and sunny here, and I have been going for a walk. So, let me assure you that this is not the case everywhere. The current floods are moderate or between moderate to a significant level.

The second chart shows you how a major flood event impacted property prices in Brisbane. When you analyse the chart, don’t forget that the current floods are not that bad because the water levels are not too high. This time, the infrastructure is better due to the significant government spending since 2011.

Figure 2: Brisbane Median House Price Comparison 2011

The second chart shows the low value suburbs that were flood-affected and the low value suburbs that were not flood-affected. It shows the medium value suburbs that were flood-affected and the other medium value areas that were not flood-affected. Then we have high value flood-affected suburbs {houses close to a million or more} and high value suburbs that were not that affected.

So, in the first three months, the property prices in almost all the suburbs went down. {This doesn’t mean this will happen again in 2022.} The median prices of suburbs that were low in value, both the flood-affected and non-flood affected areas, dropped. The prices fell by 22% in the first three months, but they only dropped by 8% and 7 % over the entire year, respectively. And after the first three months, the property prices clawed back. The value of the medium value suburbs {priced close to $1,000,000}, the ones that were flood-affected dropped in the first three months, but if you look at the entire year, they still grew close to 2%, which I think is phenomenal.

The exciting part is that the value of medium value, non-flood affected areas (those close to $1,000,000) dropped in the first three months and didn’t stop at that. They overall had a drop.

So, to drive the message home, it is hard to draw any meaningful conclusions between the suburbs that were flood-affected and the ones that were not flood-affected. So, the lesson we learned from the previous floods is that even if you are not in a flood-affected area, the sentiment still washes over the market, and the psychological impact affects both kinds of suburbs.

Now let’s assess the high value suburbs that were flood-affected. The value of these suburbs dropped the most, almost by 15 to 16%, over the year, and incidentally, the high value suburbs that were not flood-affected saw a drop. However, the decline was comparatively less.

So how do you explain this phenomenon where the value of the most expensive and cheap suburbs was dropping a lot, but the value of the medium suburbs was not dropping significantly?

One way to look at it is that the most expensive, high value suburbs are the ones that are around the center or close to the Brisbane river, like Newstead, New Farm Park, Toowong, St Lucia, Annerley, and Graceville. Being next to the river, they were affected more. The houses got destroyed tragically, and therefore the prices dropped the most.

The same phenomenon is for low value suburbs like Ipswich and Logan that were heavily flood-affected. However, not every area in the Ipswich and Logan area was affected. I have always warned people to invest in these areas carefully because those are the suburbs that drop the most.

If you look at the medium value suburbs, such as Underwood, Chermside, Aspley, Boondall, and Everton Park, they were not much affected. They were probably affected by a one or 2% drop or 5 % drop, which is less than 8% or 15%.

Now let’s understand where the Brisbane property market was in its growth cycle when the 2011 floods hit. If you see the third chart, in 2010, the property prices had started to abate because of the new state government. They were cutting thousands of public sector jobs which directly or indirectly constituted more than 50% of employment in Brisbane back then. So, it was a significant factor leading to the downturn.

Brisbane Median Prices // Source: https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/residential-property-price-indexes-eight-capital-cities/latest-release#data-download

Today we have a completely different scenario. The property prices have already doubled in the last ten years, so we are at the top of the property cycle. The prices were already due to correct themselves, and the floods happened when we were in a down cycle. Floods occurred during the start of a down cycle, and it just allowed the market to freefall a little more. If you put this into perspective, the freefall happened mainly in the first three months after the floods in January 2011, and then the recovery kicked in.

Coming back to the present times, we are not in the same situation. Brisbane right now has grown by about 20 or 30%, or maybe a little bit more, depending on where you are looking, and it is right at the start of its next growth cycle. If you look at the next ten years, the property market is still at the bottom of its cycle, so there’s no doubt that the property prices will be affected by the current floods. The property prices will likely not go up by 2 or 3% per month as has been the norm. They may even flatten out because of the sentiment that comes out of the market.

But the question we should be asking is, are they going to be affected as much as 2011? No, probably half. I say the half because the infrastructure has improved, and the floods aren’t as impactful as 2011. The next three months are going to be a little bit helter-skelter. I think some areas of Brisbane’s property prices may even come down to 3% as they did in the previous floods, especially in the medium value areas in Brisbane. I have always been a big proponent of medium value areas in Brisbane. {Here, I am not talking about the top end of the market, not the cheap houses in Ipswich and not even the super cheap ones in some parts of Logan.} The medium part of Brisbane wasn’t as affected as the other parts in the 2011 floods. So, there will likely be a bit of a slowdown, but then the long-term fundamentals will kick back in, and it will start looking up again. I can assure you that the buyers’ inquiry in Brisbane is still robust even in the last one or two days.

So if you’re in Sydney or Melbourne, I would still say it is an excellent time to buy in Brisbane as long as you know where to buy and, of course, never buy a flood-impacted property.


The author is a Brisbane-based property investor and a famous YouTuber. Through his videos, he shares his knowledge on how to grow wealth and passive income through property investing. For more, visit consultingbypk.com.au

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