April 15, 2011
Three months down the track and the knock-on effects of Queensland’s recent cyclone and flood devastation is being felt by householders and banks alike.
Loan Market chief operating officer Dean Rushton has said the floods are expected to have a negative impact on banks, borrowers and house prices, as household budgets strain and reduce banks’ willingness to lend.
House prices across the Sunshine State are predicted to fall as, aside from the obvious problems facing those whose homes were damaged or destroyed, the areas most affected face devaluation as potential buyers become wary of moving into flood-prone areas.
Mortgage stress also is hitting home in these towns and suburbs as people struggle to make their repayments. And while it’s unlikely many will be sympathetic to their plight, banks too are feeling the pinch as they fail to recoup the full value of foreclosed properties that have been badly damaged. Mortgage insurance, which is supposed to cover the banks in the case of mortgage defaults, doesn’t cover flood damage.
Queensland Premier Anna Bligh recently said 28,000 homes would need complete rebuilding following the floods, while many would be uninhabitable for weeks, months or even years.
Experts predict difficulties in paying mortgages at the level that might be experienced in Queensland are significant enough to affect the entire Australian mortgage market and its global position. The median house price in Brisbane fell 1 percent in November, seasonally adjusted, to $432,900, according to RP Data.
“For the next six years or so, a flood report is going to be the chestnut for anyone interested in buying property in Queensland or other states, as well,” Rushton said.
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