Flood Victims Need ‘Value’ Compensation

Millions of dollars in unseen damage caused.

by Neil Jenman

For many years, Queensland solicitor Tim O’Dwyer has warned would-be property buyers about the likelihood of floods in his normally Sunshine State. O’Dwyer is furious that the government makes it compulsory for auctioneers of water-damaged vehicles to disclose to prospective buyers that the vehicle has been flooded but no such law applies to protect the buyers of flood prone properties.

It’s been nearly 40 years since the last great floods hit Brisbane. That’s long enough for the awful memories to fade. Many of the people who suffered in the past floods are no longer alive – and many of the people suffering in the current floods weren’t even born when the past floods struck.

A lot of questions are going to be asked in the future about the 2011 floods. A common question will be: Why weren’t we warned? Well, the simple reason is that there is no law which compels estate agents or property owners to warn prospective buyers or tenants that a property is in a flood area.

For some of today’s flood victims, the first they knew about their homes being in a flood area was when a policeman knocked on their door and told them to evacuate.

It has been so long since the last floods that many buyers haven’t bothered to ask if a property is likely to flood. Not so in the future. One of the most common questions homebuyers will now be asking is: Is this home in a flood area?

Now, while every Australian feels the awful pain of the flood victims and while tens of thousands of people (still not enough) have donated their time and their money, very few of us would swap places with the flood victims. Would we want to go through what they are going through? Would we want to buy their homes?

So, what’s going to happen to those flood victims who decide to sell their homes? They are going to be in for more pain. First, it’s going to be tough to find a buyer for their home and, second, they are going to find that the value of their home has plummeted.

Last week, a respected Brisbane property valuer confirmed that the prices of flood affected properties are likely to fall by between 30 and 35 percent. That means that a $500,000 home will suddenly be worth $350,000. An estate agent in Ipswich (west of Brisbane) said it would be almost impossible to sell riverfront properties that were once million-dollar mansions.

So what happens to those people who, before the floods, paid the normal market price for their properties and who now find that they are burdened with the stigma of having a ‘flood prone’ property? Surely they deserve some help. Yes, these people should receive ‘loss of value’ compensation.

All of Australia needs to realise that the damage suffered by the flood victims is not limited to what we can see, the mud-soaked homes and the ruined possessions, the damage has also occurred to what we can’t see, the value of their properties.

The financial pain that many flood victims are suffering has not been fully reported, yet. Some of the most painful stories will be of those people who were not covered by flood insurance and whose homes are now ruined. They will need to completely rebuild. Where will they find the money? Hopefully from the money that’s been donated.

But what happens to those who decide to sell up? If they paid top market price for their homes and are now faced with a 30 per cent loss, these people should also be compensated. Sure, it will be a large expense. Sure, it may cost more than the money currently raised. But that’s why we need to give more. With more than 35,000 homes affected, the damage to the value of these properties will be enormous. Many of those people will be in dire financial straits through absolutely no fault of their own.

If we combine together and donate time and money to help the flood victims now, then surely we can get together to support them in the future.

Bottom line: It’s about helping our mates.