The explosion of single person households…and the implications for the property market and investors - March 2025

By Guest Blogger, Pete Wargent, 

Next Level Wealth 

Cyclone Alfred hits

In recent weeks, parts of Brisbane, the Gold Coast, and northern New South Wales were battered by ex-tropical Cyclone Alfred, putting extreme weather events back on the media’s front pages.

Thousands of homes went without power and water for days, and there was widespread damage, albeit less than was feared.

Some homeowners had been unable to insure their homes adequately following previous flooding events, making their current living arrangements untenable, and the government may need to intervene in cities such as Lismore to facilitate buybacks and enable families to move.

Climate modelling and housing risks

The Reserve Bank of Australia has noted its research papers that Aussie banks may become exposed to credit losses related to climate events such as fire, floods, droughts, and cyclones, as temperatures and sea levels rise, and as instances of extreme rainfall become more acute.

The result could be significant declines in house prices in specific regions of the country. Modelling suggests that around 3½ per cent of Australia’s dwellings have a value at risk (VaR) rating of more than 1 per cent (in effect, a ‘higher risk’ property) today, and this figure is projected to increase to around 8 per cent by the end of this century.

A property classified as higher risk would be likely to incur greater costs from insurance, repairs, and maintenance, and such dwellings may experience price declines accordingly as they become less attractive to own.

The bank’s modelling suggests there may be over 250 ‘climate-sensitive’ suburbs by the middle of this century, rising to nearly 1,450 exposed suburbs by the end of the century, largely concentrated in coastal and agriculture regions.

Source: Reserve Bank of Australia

Notably, and perhaps not surprisingly given this week’s events, south-east Queensland and northern NSW suburbs featured prominently.

Source: Reserve Bank of Australia

Of course, there’s an awful lot of conjecture in these figures, but the message is clear for homeowners – you need to think about climate risks, and the ability to insure your home in the future.

Caveat emptor: let the buyer beware!

Unfortunately in recent decades housing estates were approved for construction in flood plains or flood-prone areas, next to landfill sites, quarries, and other sub-optimal locations.

What are the strategies for buying and selling properties in regions susceptible to natural disasters, including risk assessment and mitigation measures that you can take?

For flood risks, many cities and councils have made flood mapping available to assist prospective homebuyers in assessing historic and potential future events of inundation.

Another good risk-mitigation exercise to source home insurance policy quotes which cover you for flood, storm, and fire risks.

If insurers deem the risk to be high, it will become immediately obvious the in the quoted price for the policy.

Recent Cyclone Alfred has made some buyers wary of buying in Brisbane and south-east Queensland.

But in truth Brisbane has had numerous flooding events in recent decades, and the at-risk areas are easier enough to avoid.

If anything, flood-free locations have become enhanced in their scarcity value since the 2011 floods impacting the river city.

After disasters there can be unexpected outcomes for local housing markets.

Sometimes we see rental shortages, which tends to bring investors back to the market sooner that you might expect.

Because flooded locations have often seen their prices recovery within a few years of a disaster event, you may even see bargain-hunters circling, although they will have challenges to navigate with respect to repairs, maintenance, and insurance, as well as the fear of future climate and disaster events.

For most buyers, significant flood and fire risks are typically easy to avoid with the requisite due diligence, and it’s worth doing so.

Not just for the ‘sleep at night’ factor, but also – as the Reserve Bank’s modelling highlights – because you will see better property price and insurance outcomes too.

Pete Wargent

petewargent.blogspot.com.au

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