A lot has been written about the effects of the natural disasters that have befallen Queensland and how they will affect our property markets.
Recently a good friend Wayne Slager who is a finance broker based on the Sunshine Coast, wrote an insightful column including some lessons to learn from what’s happened.
In his newsletter Wayne said:
There’s been dramatic weather and flooding in every eastern state in Australia from central Queensland down to Tassie.
It was impossible not to heart-broken by the tragic loss of life and the unimaginable scale of damage and destruction across an unprecedented area. Around 75% of Queensland was affected which is an area larger than France and Germany combined. Then there’s the Victorian floods.
My sympathies to all those affected. And the recovery continues.
Equally, one couldn’t be but impressed with the army of volunteers offering to help those affected. What a wonderful community spirit on display.
More recently, Queensland was again rocked, this time by Cyclone Yasi. Our summer has yet to finish so we’re not out of the woods yet.
If anything, these events show how fragile and vulnerable we really are.
Being Brisbane born I recall the similarly devastating floods of 1974 and recent events only prove that history does, in fact, repeat itself.
So, what lessons should we learn and take away from all this?
1. Obviously, preservation of life is paramount. The next best thing is to ensure you are insured against all reasonable personal and business risks.
If the past few weeks were not a wake-up call to review your personal and business protection policies then I don’t know what is. If not for you, then do it for your family and/ or your business partners. Just do it!
In this regard I will be progressively contacting our personal and business clients to help them do this. I have a close alliance with a specialist in this field, Adrian Read of Personal Insurance Services Australia, and I’d strongly encourage all to take advantage of Adrian’s honest, professional advice.
2. Property and asset insurance. Flood insurance is a hot topic and has caused considerable debate. I expect changes at an industry level will follow but there’s one thing that won’t change and that is that we are each responsible for the insurance we buy. Check your policies to ensure they cover you for the risks you want protection from. If you’re not sure, ask questions of your insurance company, adviser or broker.
Not everyone wants or needs flood insurance. Despite the terrible damage to so many homes, it’s important to remember that only 2% of Brisbane properties (according to Brisbane property researcher/ adviser, Michael Matusik) were affected so one size, and therefore price, does not fit all.
Again, we want to provide practical assistance in this regard. We work closely with one of Australia’s largest insurance companies and have a dedicated account manager to support us and service our clients.
In addition to great personal service, our clients can select from different levels of cover, enjoy multiple policy discounts plus the advantage of paying by the month for no extra cost (avoiding a 9% premium loading).
I recently saved $300 on a motor vehicle after reviewing my policy. I know it was an equivalent cover as it was from the same insurance company! -however I had previously sourced the policy from the motor dealer.
Please contact us for an insurance quote, now or on renewal. You should consider reviewing your policies NOW as a good percentage of people are under-insured which can be almost as stressful as no insurance.
Available cover includes house, contents, motor vehicles, caravans and trailers and landlord insurance. Business policies will follow this year.
3. Review your loans and finances and seek advice on your options. There’s an enormous amount of support and advice from most lenders and insurance companies as well as business groups, Centrelink and other government agencies. There are too many to list here but if you’re unsure please contact us and we’ll aim to point you in the right direction.
We can certainly advise you on your finance options and strategies.
4. There’s been some talk that the floods have been ‘a good thing’ for the economy. You’re kidding me, right? On that basis, we should have a flood every year just to give the economy a boost. The reality is that the floods will be a huge cost to individuals and the economy as a whole.
We’ve lost lives, property and personal possessions plus business and personal incomes. Lives cannot be replaced while thousands have been dislocated. Many personal possessions have been lost or are irreparable.
Yes, there will be those who will benefit from the activity the recovery will generate but its quantum and value will be greatly overshadowed by the immediate and long term losses to the affected areas, and the nation.
Public and corporate infrastructure will take a long time to fully recover. Personal, corporate and government cashflows and budgets will be affected and this will be felt beyond the areas directly impacted.
5. Then there’s the impact upon property markets in the affected areas, particularly Brisbane being the largest population centre involved.
Some opportunistic investors will be specifically waiting for properties from emotionally and/ or financially stressed owners to come onto the market.
Again, it bears remembering that only a small fraction of Brisbane homes were flood damaged. Regional areas such as Rockhampton and other coastal towns, Central Highlands (Emerald) and Toowoomba/ Western Downs (eg Dalby) and Brisbane valley, and southern border regions may have been more greatly affected on a percentage basis but many homes will be replaced/ repaired through insurance, savings and/ or borrowing.
This will be especially so for the premium riverfront homes in Brisbane.
Even so, the recovery will take much longer than some owners will be hoping for. There will be a significant demand for materials, building professionals and skilled labour and this will be costly, time consuming and frustrating. Whether they can or want to wait is yet to be seen but, again, the current expectation is that most people will stay and rebuild.
There will, of course, be those who decide sell and move but most of these will do so after they’ve rebuild to maximise their sale price. In short, don’t expect a glut of damaged properties to come onto the market.
However, the real opportunities might lie elsewhere.
What is already occurring is a notable demand for rental properties near the affected areas as people want to stay in the vicinity for convenience. As a result rents are rising – some by a good margin. You can also expect an increased demand to buy these same ‘flood safe’ properties.
There are many more of these safer properties so why take the risk of buying a flood damaged property with all its inherent problems as well as the stigma of being in the flood zone. I wonder if this time around it will take much longer for people to forget the ‘great flood of 2011’?
I’m sure the positive opportunities will be better than the negative ones so maybe our approach should be ‘glass half full rather than half empty’.
Irrespective of where you think the opportunities are, the real answer is to first prepare a property investment plan or PIP as I call them.
Do you have one, ie do you know what you want to achieve, how many years you have to achieve your goals, your risk profile, what type or mix of properties best suit, how many you need, how you will finance them, how you will manage the associated risks and what your fallback and exit strategies are?
Source: Wayne Slager – Your Loan Adviser
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