How property sale trends after the Queensland floods can affect the amount of loan buffer you can put in place on your existing Queensland properties. – Jenna Ford
For those investor clients who hold property in Queensland and are watching the trends in the marketplace there, the impacts of natural disasters have seemed, in the short term, to dampened prospects for reasonable sale prices and restrict lender valuations against which equity can be raised on existing properties there when you go to renew loan safety buffers.
Tragedy aside, as catastrophic as the Queensland floods have been, the long term outcomes for the state and national property market can ultimately yield positive results.
While many investors have remained on the sidelines in recent months, an increasing number are re-entering the market tentatively, recognizing the strength of the market and the potential opportunities for growth and the restoration of confidence over the long term. With this returning optimism we would be expecting lender valuations against existing property to improve. This will be due to the improving property sale prices and these are the prices against which bank valuers pitch their estimate of your existing property’s worth when you go in for a loan increase.
In the short term, the loss of homes and negative impacts of the Queensland economy have been apparent. The level of activity in the rebuilding process, however, is already wielding optimism. An estimated $AUD10 billion in federal and state funding has been allocated to reconstructing and restoring the region, and along with the important drivers of property prices (a robust resources sector, solid infrastructure, employment and population growth) will play a vital role in this reconstruction.
For all other states, the effects of the floods will be nominal. While there will be interstate population shifts to Queensland due to rebuilding work opportunities, the extent of this is uncertain. It is expected that properties in the region should see some solid growth over the medium term. The rebuilding process will create employment and population growth which will drive the demand for housing. This may ultimately set SE Queensland up for another economic boom.
Major side effects for investors in SE QLD
- Burgeoning rents due to displaced homeowners needing to rent whilst homes are being rebuilt
- Re-construction of Queensland
- Insurance premiums to increase substantially as flood probabilities in areas change
- Tourism market may experience a temporary hiatus
- Supply of new homes may be slow as town planners slow down approvals with more stringent requirements to ensure the flood and high wind proof capacity in the new buildings up for planning approvals.
In the short term, as uncertainty exists and the disaster is still fresh in people’s minds, there is unlikely to be any movement in prices.
So, expect investor (especially interstate) activity to be subdued over the next 12 months, and then, once sentiment shifts there will also be significant movement.
Important notice and general advice warning:
This information is of a general nature only and is not intended to represent investment or professional advice. This information does not take into account your individual objectives, financial situation and needs. You should assess whether the information is appropriate for you and consider talking to a financial adviser before making an investment decision. A Product Disclosure Statement (PDS) for the products mentioned in this communication should also be obtained and you should consider the PDS in deciding whether to acquire, or to continue to hold, any investment.
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