QUEENSLAND FLOODS:

As the floodwaters recede and the recovery effort begins, we are starting to consider quantifying the cost and value impact. It is early days yet, but the overall cost figure estimates in the press have increased considerably, from an initial $6 Billion to maybe $20 Billion or more.

Outside of real estate, the floods have affected agriculture, coming straight after the long drought. Fresh food produce is likely to rise considerably in cost for the next year. The impact on new resource projects and infrastructure, is unknown at this stage, but important. For Queenslanders personally, any impact on projects affects their job prospects and their ability to pay for flood recovery, which is all tied in. More generally, the market expects that the Reserve Bank will be slower to increase interest rates, with no rise expected for at least the first half of 2011, despite expected rises in headline inflation.

THE EXTENT OF THE FLOODS

The 1974 flood was worse; while severe the 2011 flood did not reach the same flood line in Brisbane though the impact was severe in regional areas.
Only 2% of all houses are affected. In context, it is not a lot. That amounts to some 28,000 properties out of a stock of some 1.4 million (as in: 28,000 homes would need to be rebuilt, according to Premier Anna Bligh, with others uninhabitable for a period). Within that total, some 850 houses along the Brisbane River were flooded. Some specific locations affected severely, e.g. Emerald, and New Farm, where many prestige riverfront properties are located.

THE RECOVERY PERIOD

In the short term, availability of trades and replacement products will be tight. Costs will rise, and resources diverted from other projects until most of the damage is fixed. This period is likely to last not much more than 6 months, however, with normality eventually returning.

IMPACT ON RESIDENTIAL PROPERTIES

Differentiate between properties that were totally submerged, versus ones that experienced some water penetration. The latter can be cleaned out and livable within weeks. The former may take months to clean up, and in some extreme cases may not be recoverable. It is estimated that only half of affected properties have defined flood insurance. It will take time for insurers to assess all the damage and initiate repair works. As for the half without flood insurance, it remains to be seen whether governments will pick up the tab. To the extent that any homeowner has no insurance and no-one else to pay for repairs, they are up for considerable expense. Public utility services will need repair and reconnection, but early signs arethat this process is well underway.

A small number of homeowners may, through a combination of circumstances, be unable to maintain mortgage payments and pay for repairs, and face foreclosure. We expect that the number of foreclosures will however be very small. Those most at risk of foreclosure are considered to be investors, who lose the rental income stream, but who didn't have flood and rental continuityinsurance, and cannot afford to maintain the payments.

IMPACT ON COMMERCIAL/INDUSTRIAL PROPERTIES

The impact on commercial/office properties will be limited, with even the worst affected buildings likely to be operational within a week or so. The CBD buildings were affected, with many basements flooded, and power lost, but this is being restored and basements cleaned out. Many emergency generators proved useless through being situated in basement areas, and some costs may be incurred through relocating these to a higher position in the building.
Some industrial areas downstream of Brisbane, and south of Brisbane, were flooded, but by and large, industrial buildings are less prone to damage from
low level flooding and can be cleaned out and made operational quickly. Many businesses invest in alternative "disaster recovery" premises, and it
was surprising to discover how many of these were flooded. Presumably there will be pressure to relocate these to higher ground.

To read the full reportplease go to :

http://www.propellvaluers.com/images/reports/qldfloods.pdf
For comments please contact:
Mr Kel Spencer Executive Manager - Marketing
0418823735
kspencer@propellvaluers.com