It could be easy to purchase a property without considering the risks or ramifications associated with flooding, particularly when real estate agents may not publicise the facts. How did this property investor avoid this pitfall?
One of the most common and concerning issues, or impediments, around property investment in Brisbane – whether acquiring new or old builds – is purchasing investments in flood-prone areas, according to Melinda and Scott Jennison of Streamline Property Buyers on the Smart Property Investment Show.
Properties in flood-prone areas are generally “priced at a lower entry point”, which can be highly appealing to investors who might be vulnerable to impulse buying.
“In our most recent floods, we all know the devastation that has occurred, it’s possible that it could recur in the future, I mean that’s just standard due diligence,” Mrs Jennison said.
Some of the areas in flood-prone regions have experienced capital growth more recently. However, there is an increased risk for property buyers and investors, as they have higher premiums generally.
In March 2017, heavy rainfall recorded by the Bureau of Meteorology throughout the Brisbane River catchment – associated with ex-Tropical Cyclone Debbie – resulted in 12.5 meter peak flooding in the Ipswich area.
Meanwhile, further downstream in Brisbane, river levels remained stable.
The level of unpredictability and severity of flooding in Brisbane-abounding suburbs or regions make this a critical issue for consideration for any investment.
Many investors will remember the devastating flash floods at the end of 2010 where Toowoomba, Lockyer Valley, Ipswich and Brisbane experienced severe flooding.
Two months later, more of Queensland experienced the devastation of Cyclone Yasi, which exacerbated the issue of flooding further.
“We haven’t purchased any properties for clients that are in flood zones; it is something that we have an initial discussion about during our strategy session,” Mrs Jennison said.
According to Mr and Mrs Jennison, a lot of people don’t think to check flood maps, or may not even be made aware that a property of interest is at risk of such a disaster.
However, Mr and Mrs Jennison are aware of the areas around Brisbane that are prone to floods, and offer that information to their clients to ensure they know what they’re getting into.
There are many reasons why using a buyer’s agent may be beneficial to property investors, but natural hazards and disasters can often go missed, particularly when properties in flood-prone areas are often offered at lower price points.
When a bargain investment opportunity sprouts on the market, it may hook investors in before they have the chance to consider how such infrequent and potentially catastrophic events may impact insurance premiums on the property.
“Even those [investors] that rent those properties, their... insurance premiums are generally higher, so it depends on an investors risk appetite as to whether they would consider a property that's in a flood-prone area,” Mrs Jennison said.
The Queensland government urges buyers to consider property location, including risk of storms and flooding, when choosing what insurance to purchase.