Home values are taking a hit in every state due to the risk of flood damage, according to PropTrack and the Climate Council.
The risk of flood is wiping more than $42bn off the value of Aussie homes and costing governments millions of dollars in lost tax revenue every year.
The PropTrack Climate Council Property Value Flood Risk Report released today is the first to track the nation’s about 2 million homes specifically subject to a flood maps and found the vast majority, about 1.4 million, have lost value as a result of their flood risk.
A typical three-bedroom, two-bathroom house in a flood map area is now worth $75,500 less than near neighbours not covered by the map.
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But discounts are higher in areas flooded more recently or perceived as having the most significant risk, with homes in Queensland and NSW accounting for almost 80 per cent of the losses.
The Chelmer-Graceville area of Queensland faces the nation’s biggest penalty for homes in a flood zone, with a more than 10 per cent reduction that equates to $303,000 on average.
Charles Wiggett of Hauss Realty sells property in the Chelmer-Graceville area and said people were still prepared to buy homes with a flood-risk because of their affordability — particularly investors.
Mr Wiggett, who had sold properties during both the 2011 and 2022 Brisbane floods, said he agreed there would be a price differential depending on the level of inundation, but he was not aware of any homes he had sold being resold at a loss.
“The bottom line is risk versus gain,” Mr Wiggett said.
Floodwaters in Graceville during the 2011 inundation of Brisbane, one of Australia’s most devestating floods. Picture: Stuart McEvoy.
The areas where house prices have had the biggest impact caused by flood risk. Source: PropTrack.
The dollar impact in the more expensive Mermaid Beach and Broadbeach area is shockingly high at $1.702m, despite representing a more modest 7.8 per cent loss to values.
With the Government’s National Climate Risk Assessment recently forecasting property values will lose $611bn by 2050, the impacts on homes are expected to expand.
PropTrack senior economist Eleanor Creagh said reasons why values were suppressed varied and could include insurance premiums, physical damage and simply the perception of risk.
“A lot of the regions that have experienced a major flood event are where the discount is largest at the individual property level,” Ms Creagh said.
“In some areas it might be 20 per cent, and in others it’s only 2 per cent. So that does suggest there’s some variation about how the market perceives flood risk.”
The research also found that around 600,000 homes, about 30 per cent of those subject to flood map overlays around the nation, were unaffected — likely due to homebuyers being willing to overlook the risk in favour if views or lifestyle benefits.
The share of homes in each state at risk of flood (main), and how much of the nation’s total flood-risk homes are in each state (inset).
Where units have had the biggest reduction in their value caused by flood risks. Source: PropTrack.
However, once an area has been affected by floods while it can regain initial lost value, more than a decade on a reduction is still likely to be in place compared to nearby homes not part of local flood maps — which is the case for many Brisbane homes impacted in 2011 floods.
“So that penalty of flood risk remains,” Ms Creagh said.
In Queensland, a third of all homes in the state, about 803,000, are at risk of flooding — with owners taking a combined $19.2bn hit as a result, according to the research.
In NSW the almost 604,000 homes in harms way equate to 16 per cent of the state’s housing market and comes with a $14.2bn financial hit.
Victoria has the next highest number at 255,704 — around 8.7 per cent of the state’s total housing, and a $5.6bn reduction in values.
By percentage, South Australia is also among the nation’s most impacted with 19.6 per cent of all properties at risk, despite that figure equating to a relatively modest 159,500 homes and a $2.1bn loss for their owners.
The shocking amount of money homes in flood risk areas have lost from their value in each state.
PropTrack senior economist Eleanor Creagh believes much of the lost value could be recouped if mittigation works were undertaken by governments.
There were 149,416 at risk in Western Australia, about 13.5 per cent of the state’s total, while the almost 35,000 picked up by flood maps in Tasmania accounted for 12.1 per cent.
Ms Creagh said it was possible government’s taking preventive action could mitigate value losses to homes as well as risks to communities.
“But the data shows that in some regions, investing in flood-risk minimisation, like in Grafton, you can protect both communities and also home values. And the return on investment can pay for itself many times over.”
The Clarence River flooded near Grafton in 2011, 2013 and 2022, but levee infrastructure maintained since the late 1960s repeatedly stopped inundation of homes; and while local flood risk covers 61 per cent of residences, home values have not been impacted.
The area is estimated to have received a more than $2 benefit in saved damages for every $1 spent on the levees.
Ms Creagh said this could be particularly important for areas with high flood risk and lower socio-economic wealth, as they were largely the most impacted, according to the research.
The Grafton flood levee shielded it from a swolen Clarence River in 2013.
Climate Council councillor and economics expert Nicki Hutley said while government’s had previously only considered the costs of addressing a flood after the fact, the potential for lost revenue from lower home values reducing tax returns was not likely to have been factored in.
“This will be a big eye-opener for governments as to what the potential is,” Ms Hutley said.
“And in terms of what they need to do, because in addition to the disruption to people’s lives and to the economy, the cost from the revenue perspective and the expenditure to rebuild — they have a double whammy.
“If I were them, I would be thinking I would be spending a significant amount of money in building resilience and that could help avoid future losses.”
She added that a $75,500 loss to home values would be playing on Australians’ minds at backyard barbecues around the country.
The Climate Council Nicki Hutley says the risks for homeowners are likely to grow as more severe weather events are recorded around Australia.
“I’ve been surprised at how much value is being foregone in terms of people’s homes,” Ms Hutley said.
“And while prices in these areas do keep rising, they certainly don’t rise as fast. While people’s home prices aren’t going backwards, the risk will have stopped things from having gained a certain amount of value.”
With a certain amount of climate change now “baked in”, she said it was only a matter of time before more extreme weather events caused flood issues for Aussie homes.
“And that risk pricing will grow as people become more aware,” Ms Hutley said.
While intervention could help reverse some of the home value losses, and save government substantial costs in the aftermath of a flood event, Ms Hutley noted there would be some homes that were simply unable to be shielded as climate change drove worse and worse events.
She said this could lead to flow on impacts to not just the owner whose property became uninsurable and potentially uninhabitable, but also to the banks that had lent to those people.
The Wilsons River reaches flood walls in Lismore during heavy rainfall from a tropical depression earlier this year. Picture: David Gray.
Despite this, government rebate schemes for homeowners who took on flood mitigation action such as raising the level of their home could be considered alongside more community-centric efforts such as levees.
Another possible outcome is that flood risks and climate risks could become a part of online real estate listings, as happens in the US on platforms such as Realtor.
The research used PropTrack’s Home Price Index that calculates values for all homes in an area based on a variety of data points including recent sales, renovations and wider market trends.
Flood risk data was sourced from Geoscape’s Planning Insights data.
The research goes beyond home sales data and provides value estimates for all residences in an area, regardless of when they last sold.
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