Natural disasters are changing attitudes to long term property values
Australian property values usually rebound quickly after natural disasters, but not this time
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Flooding is beginning to have long term effects on property values, a new report from CoreLogic reveals.
The East Coast Floods – One Year One report examined the impacts of the extreme weather events on the Richmond-Tweed area (also known as the Northern Rivers region) on the far north coast of NSW, as well as the Brisbane region in early 2022, which some described as a ‘rain bomb’.
The report, authored by Corelogic economist Kaytlin Ezzy, said while residential values were historically fairly resilient following flooding events, recovering within three to five years, the 2022 disaster had changed perceptions among homeowners and potential buyers.
“Attitudes towards flood-prone areas, and climate risk in general, are changing,” the report said. “Homeowners, lenders and insurers are becoming more cautious of the risks associated with climate change and are adjusting their risk premiums accordingly. For some impacted homeowners, the risk of another flood is likely to be top of mind, and we could see a number of residents accept government buy-back offers where they are available.
“For others, the increased costs of insurance could price out existing owners and dissuade new buyers from areas vulnerable to flooding.”
The report noted that while the Insurance Council of Australia had closed 80 percent of claims from the events, which are estimated to have cost $5.7 billion – Australia’s most expensive natural disaster on record – that was only part of the story.
“A sizable number of people are still waiting for building repairs to start, while other uninsured residents have been left with limited resources to undertake repairs,” the report said. “Government intentions around buy backs are still playing out and the number of post flood home sales is still low.
“The full impact of the floods won’t be known until these factors have played out.”
Using satellite imagery, CoreLogic has zeroed in on areas most affected by floods. Perhaps unsurprisingly, flood-prone areas such as South Lismore and North Lismore recorded flooding across 80.8 percent and 70.1 percent of properties respectively. The news was similarly grim in West Ballina, where 56 percent of properties were impacted.
However, areas considered low risk, such as Girards Hill (35.1 percent) and East Lismore (22.4 percent) were also heavily affected.
In the Byron Bay region, Mullumbimby experienced the highest numbers, with 17.4 percent of properties impacted by flooding.
The impact on values has been immediate, and not just in those areas directly affected by floods, CoreLogic data reveals.
“Mullumbimby recorded the largest 12-month decline nationally, down -30.1 percent, roughly equivalent to a $432,000 decline in the median value, followed by South Lismore (-27.0 percent), Ocean Shores (-26.8 percent) and Byron Bay (-25.4 percent). The other impacted suburbs saw values fall between -22 percent and -25 percent,” the report said.
“Interestingly, a number of suburbs that were relatively unimpacted by flooding also recorded significant declines. Values across Bangalow, Lismore Heights and Suffolk Park fell by -28.4 percent, -25.7 percent, and -24.3 percent, respectively, and East Ballina and Alstonville recorded slightly smaller declines of -20.2 percent and -19.6 percent.”
While it noted that reduced economic activity across the whole region was a likely contributing factor, the report said that the decline had been less in Lismore’s elevated suburbs of Goonellabah which recorded a milder -7.2 percent drop in values, as well as a number of surrounding farming communities where declines were less severe.
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The typically busy spring season for the housing market was a dud, and the summer isn’t looking much brighter.
Housing services companies like Zillow Group and Rocket RKT +3.78% were loud and clear last week on earnings calls: Rocket CEO Varun Krishna called the quarter through June “one of the toughest spring housing markets in years.”
Jeremy Hofmann, Zillow’s chief financial officer, said on a conference call that the company predicted earlier this year that the market for mortgages would be flat. “We actually now think it’s going to be down low-to-mid-single digits,” he said.
The rest of 2026 will remain challenging for mortgage origination volume, says KBW analyst Bose George. The question now is what happens in 2027. “If mortgage rates remain [around] 6.75%, I think that’s going to be challenging even for next year,” he says.
But what’s bad news for mortgage companies could be a positive for bargain hunters. Buyers can expect prices to grow more slowly—or mildly decline—with less competition as long as mortgage rates remain unpredictable.
Mortgage rates at the beginning of the year were solidly below year-ago levels, notes Zillow senior economist Kara Ng. But they surpassed last year’s levels recently, she adds, referencing Freddie Mac’s weekly survey of 30-year fixed mortgage rates. Last week’s reading, at 6.69%, was higher than year-ago levels for the first time in 2026.
“From the affordability point of view, it’s going to get more challenging in the second half of the year,” she says. “And when affordability gets more challenging, that impacts sales and home price appreciation.”
Mortgage application data tracked by the Mortgage Bankers Association has cooled since the beginning of the year. The trade group expects that the number of mortgage originations in the remaining two quarters will lag behind last year’s levels, after exceeding 2025 levels in the first half.
Rocket’s early-stage data—which the company told Barron’s it derives from its brokerage Redfin, demand for its mortgage products, and signs in its servicing portfolio that a homeowner is preparing to refinance or move—“leads us to expect the third quarter mortgage market to be smaller than the second,” Chief Financial Officer Brian Brown, said on the company’s call. He added that such an occurrence is “something the industry has not seen since 2022.”
Prices will be about flat nationally, Ng says. Zillow’s most recent forecast, which shows how values are expected to change in the year ending June 2027, show them dropping in roughly half of the 100 largest U.S. metros for which data is available.
Buyers aren’t rushing in at a time when mortgage costs are rising and unpredictable. But those with the right combination of patience and cash could stand to benefit. “If you are financially qualified to buy a starter home, you are facing less competition and you’re more likely to get a price cut,” Ng says.
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