Battered Brisbane seeks to bounce back
After four years of flat sales and stagnant values, the last thing the property market in Brisbane needed was a devastating flood. But the heavens opened on Queensland's capital city in January, dumping the most rain in living memory.
Around the world, images of houses literally floating away, and of anguished families left homeless, made headlines. Overnight, confidence drained from the city's fragile property market.
Brisbane-based buyer's agent Andrew Allen recalls the day the phone stopped ringing. 'It was like someone pulled the plug,' says Allen, an investment property specialist whose clients include buyers in Hong Kong. 'Those who did call were panicked owners checking to see if their property had survived.'
The devastation was horrendous but, thankfully, not widespread. In fact, only 2 per cent of Brisbane suburbs were flood affected. The impact on confidence was more widespread.
There were bargains to be had, as hapless vendors who needed to sell drastically reduced their asking price. But no one was buying. For some agents, it was the last straw. 'They left the industry,' Allen says.
March brought with it 'some level of catch-up'.
Those buyers who did return came with a new appreciation for real estate proven to remain high and dry. The floods had been a wake-up call in a city that is 'basically a flood plain', Allen says.
Even though a flood report is one of the first things his company, Allen Real Estate, checks as part of its due diligence for clients, as a Brisbane resident himself, Allen knows people tend to become complacent. 'It used to be a case of, 100-year flood - that's not a big risk,' he says. Nowadays, 'flood free' has become an agent's catch cry.
Natural disasters don't even need to be local in order to hit confidence. Cyclone Yasi hit the Queensland coast 1,500 kilometres north of Brisbane in early February, but it still battered the property market.
'Investors who were there no longer were willing to commit,' Allen says. 'They were considering the billions of dollars the government would need to spend rebuilding, and what this would mean for the ongoing development of Brisbane, and the future of its property market.'
Even ripples from the Christchurch earthquake in New Zealand were felt among his client base. 'One potential investor who had four properties in Christchurch needed to sort out the repairs there,' Allen says. 'These events are impacting on people because they don't have the funds they once did, or they have to take care of their own backyard first.'
Such is the power of natural disasters that the impact can be felt from even further afield. The Japanese are enthusiastic investors in Queensland property, especially high-rises along the Gold Coast but, when the earthquake and its fallout hit last month, it stopped inquiries dead in their tracks. This was a further blow to developers already struggling.
'There is much speculation about whether many of the Japanese investors will settle on units purchased off plan in these developments. They're too busy investing in rebuilding Japan,' says Cherie Leburn, director of Gold Coast-based LuxuryHomes Australia.com.au.
As a result, Leburn expects the effects of the earthquake and tsunami in Japan will set back the entire construction industry in south-east Queensland.
Leburn reasons that the disaster at home will almost certainly impact on Japanese tourists' annual A$83 million (HK$680 million) spending on the coastal 'Glitter Strip', visits which in many cases lead to property investment. She's seen it before.
'Having lived as a real estate agent through the Brisbane 1974 flood and recovery period, I would say people take a lot longer to recover from a natural disaster. However, this time we have the double whammy with these natural disasters following close on the heels of the global financial crisis - there was no time to recover before they struck.'
Other agents agree. Alan McGillivray, from Alan McGillivray Real Estate, says many properties in prime locations are selling at 40 per cent below their original market expectation.
As agents and developers look for ways to boost business, Leburn suggests Gold Coast developers should be wooing Chinese investors.
Japan is the Gold Coast's second biggest provider of overseas tourists but that is expected to drop to No 3 when surpassed by China later in the year.
Perhaps the next wave of investment in Queensland will come from our part of the world?
Lucy Cole, of Lucy Cole Prestige Properties, believes it's already happening. She has seen strong buyer inquiry, translating to sales, from Hong Kong and the mainland, over the past 12 months. 'They are the cashed-up market and they're looking to buy,' Cole says.