The Rochester township is one of Victoria’s most recent significant flood victims. Picture: Jason Edwards.
The risk of flood is wiping a shocking $5.6bn off the value of Victorian homes and costing the government 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 worth $75,500 less than near neighbours not covered by the map.
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Victoria carries the nation’s third highest losses as a result, with 255,704 homes subject to flood maps — about 8.7 per cent of the state’s total housing, with the combined value loss at $5.6bn.
NSW and Queensland are worst affected, with an estimated $33.4bn in home value reductions combined — about 80 per cent of the $42.2bn reduction uncovered by the report nationwide.
PropTrack senior economist Eleanor Creagh said reasons why prices were suppressed varied and could include insurance premiums, actual physical damage and even just the perception of risk.
“But 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.”
Homes in some regional parts of Victoria are still being sold with floors and parts of their walls removed to show that past floods have not impacted them, years later.
How each Aussie state’s home values have been reduced by flood risk. Source: PropTrack.
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.
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.
“So that penalty of flood risk remains,” Ms Creagh said.
However, Ms Creagh said it was possible government’s taking preventive action could mitigate value losses to homes as well as risks to communities.
Where flood risk has caused the biggest losses to home values around Australia. Source: PropTrack.
“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.”
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.”
Economists have claimed that improving flood resillience around Australia could have big impacts on government coffers, as well as home values. Picture: Jason Edwards.
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.
The research used PropTrack’s Home Price Index that calculates values for all homes in an area based on a variety of data points, as well as Geoscape’s Planning Insights data for flood maps.
It differs from prior research as it projects values to all homes in an area, not just those that have sold.
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