How has the NSW flooding affected the housing market
As we move towards the end of March, the Australian housing market continues it surge. According to data collected by Corelogic showed that overall property prices saw a 2.1 per cent increase in the month of February, rising at their fastest rate since 2003. Sydney’s dwelling prices rose 2.47 per cent month-on-month and 2.75 per cent year-on-year. The monthly increase caused dwelling prices in the NSW capital to stand at a median value of $895,933. Houses in Sydney recorded the strongest growth over the month on figures, with a 3 per cent increase in the median to $1,061,229.
The 1-in-50-years weather event this week saw the declaration of 38 disaster zones with over 15,000 people across both NSW and Queensland on standby for evacuation. However, it has failed to dampen demand from keen buyers across NSW. Expectations for a pullback in demand for areas directly affected or indirectly cut off by the floods were proved inaccurate, according to real estate agent. Agents say buyers are still calling about properties currently cut off, with plans for inspection once the area are accessible again. However, the floods have put a halt to some ongoing transactions, with many buyers being forced to reconsider during the cooling off period or delaying final inspections until after the water has receded.
However, buyer’s confidence overall should be mostly unaffected provided they are aware of how insurance cover applies and their rights should purchase a home in disaster affected area. Should the home purchased be affected by flooding, prior to settlement, the property needs to be in the same condition as when they agreed to buy it. If the property is damaged, buyers could renegotiate the price or delay settlement until the damage is repaired.
Furthermore, the floods will have profound impacts upon the property market beyond directly affected suburbs. Despite majority of buyers not being dissuaded from the affected areas, as small portion will look towards other suburbs for their next home, thereby increasing demand in other suburbs. Furthermore, damages to property in the area will at least decrease overall supply of property in the short term, which will only add fuel to the rising prices. Partially due to the huge surge in property prices, there have been calls for RBA to hike rates. Such concerns are reasonable as rising house prices have greatly damaged their affordability for first home buyers. However, the flood damages will negatively impact the affected areas local economy which will in turn affect the rest of the economy, greatly increases the need for economic recovery, provided by macroeconomic policies.
Such unpredictable events, can have greatly detrimental impacts upon the finances of those both directly and indirectly effected. Previously suitable financial instruments are not longer appropriate given the changing circumstances. At KBRZ we aim to provide service that best suite our client’s needs, with our extensive network and years of experience in the industry, we are able to match our clients to brokers providing financial products tailored to their circumstances.