An army vehicle drives past houses affected by floods in Townsville, in 201 after days of torrential rain. Picture: AAP Image/Dan Peled.
A surprise factor making a tenth of Aussie homes 10 per cent cheaper than neighbours has a wallet-busting sting in the tail.
Desperate owner occupiers and interstate investors buying sight unseen are among those jumping on the one in 10 Australian homes that are listed as much as 11 per cent cheaper than surrounding areas due to their flood risk – but now research warns even that price could be considered overvalued given other major financial costs involved.
A house surrounded by flood water in Townsville’s Hermit Park in 2019’s floods. Picture: AAP Image/Dan Peled.
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A controversial university study has warned the risk is very real for one in 10 homeowners who choose to misinterpret their property’s flood risk to capitalise on cheaper prices, warning “residential properties exposed to flood risk are overwhelmingly overvalued, especially in coastal areas”.
“The property price discounts don’t compensate for the extra insurance costs owners have to pay for,” the report warned, with the risk of flooding being downplayed by owners.
Just weeks after more than 200 people died with billions in damages off one of the worst floods to hit Europe, report author associate professor Song Shi of the University of Technology Sydney’s School of Built Environment warned in Australia ”people tend to ignore the risk”.
Flood-damaged items from homes in the suburb of Rosslea in Townsville, in 2019. Picture: AAP Image/Dan Peled.
A devastating post-flood scene in Spain that’s familiar to places like Brisbane which had a one-in-100-year floods twice in the space of a couple of years. Picture: JOSE JORDAN / AFP.
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“Home buyers sometimes think that a “1-in-100-year flood risk” means flooding will only occur once every 100 years, when in reality it means there’s a 1 per cent chance of such a flood happening in any given year,” he said.
“The chance of a flood occurring at least once in an 80-year lifetime is 55 per cent for a 1-in-100-year flood and 15 per cent for a 1-in-500-year flood. The likelihood of experiencing such devastating floods over a life span is much higher than people might think.”
The study found while more residents were using digital flood maps to check their inundation levels, “beyond a certain threshold (one-in-500-year flood), people tend to ignore the risk”.
“This can be dangerous, as extreme rain events, such as those recently witnessed in Spain that resulted in a devastating death toll, are rising due to climate change,” associate professor Shi said.
Residents use a boat and an inflatable pool to salvage furniture from flood-affected homes in Townsville during 2019 flooding. Picture: AAP Image/Dan Peled.
Torrential rains hit southeastern Spain sparking major flooding in the Valencia region in November. Picture: Ramón / AFP.
“In Australia, more than one in 10 houses in Australia are situated in flood zones. Flooding from intense rainfall and overflowing rivers is the most common and costliest natural disaster.”
In the report’s case study suburb Richmond on the outskirts of Sydney, buyers could pick up homes in the one-in-100-year flood risk zone at a 10.8 per cent discount with a 4.4 per cent discount on prices in the one-in-500-year flood risk zone.
The report, co-authored by Dr Mustapha Bangura and Associate Professor Sumita Ghosh, warned that the cost of insurance for a house in a flood zone was a significant financial burden with premiums running as high as $4,606 more than areas in no-risk zones, according to the study.
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