Natural disasters are changing attitudes to long term property values

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.

Australia’s retail property sector entered 2026 as the strongest performing commercial asset class, but rising geopolitical risks and cost pressures are beginning to test its resilience, according to new research from Knight Frank.

The latest Australian Retail Review shows the sector rode a wave of consumer spending and constrained supply through 2025, delivering total returns of 9.2 per cent and driving transaction volumes up 43 per cent year-on-year to $14.4 billion.

That momentum carried into early 2026, with around $3.6 billion in deals recorded in the first quarter alone.

“Retail clearly emerged as the standout commercial property performer in 2025,” said Knight Frank Senior Economist, Research & Consulting Alistair Read.

“Improving household spending, limited new supply and stronger leasing fundamentals combined to drive better income growth and renewed investor confidence in the sector.”

Spending rebound drives retail strength

A lift in household spending has been central to the sector’s performance. Consumer spending rose 4.6 per cent year-on-year to February 2026, supported by easing inflation and improving real incomes.

That shift flowed directly into retailer performance, with average EBIT margins across major retailers rising to 8.9 per cent in the first half of 2026, their strongest level in several years.

“Stronger consumer spending was critical in restoring momentum to the retail sector,” Mr Read said.

“Retailers have generally been better able to absorb costs, rebuild margins and support sustainable rental outcomes, particularly in higher-quality centres.”

Improved trading conditions also pushed leasing spreads up 4.2 per cent in 2025, reinforcing income growth and supporting capital values.

Geopolitical tensions begin to bite

But the outlook has become more complicated. The report warns that escalating conflict in the Middle East and its impact on fuel prices, supply chains and interest rates could weigh heavily on consumer spending.

“Higher fuel prices, flow-on cost pressures across supply chains, and recent interest rate increases are collectively squeezing household budgets, and early consumer sentiment data suggests confidence is already softening,” Mr Read said.

“While household balance sheets remain generally resilient, heightened uncertainty over future costs is likely to weigh on spending — particularly in discretionary categories — in the months ahead.”

The impact is already being felt in investment activity. While the year began strongly, transaction volumes slowed in March as investors paused amid the uncertainty.

“Early indicators suggest elevated uncertainty has already begun to affect the market. While retail investment enjoyed its strongest start to a year in a decade, with nearly $3 billion transacted by the end of February, activity stalled in March, as investors took a pause amid elevated uncertainty,” Mr Read said.

Solid foundations support medium-term outlook

Despite the near-term headwinds, Knight Frank maintains that the sector’s underlying fundamentals remain strong. Limited new supply, high construction costs and population growth are expected to continue supporting rental growth over the medium term.

“Retail has entered this period of uncertainty from a position of strength,” Mr Read said.

“Supply-side constraints, population growth and improving income fundamentals remain powerful structural supports for the sector.”

The report highlights several trends shaping the year ahead, including steady yields as interest rates rise, mounting pressure on tenant margins, continued outperformance of prime centres, the growing need for logistics integration, and risks linked to underinvestment in capital expenditure.

For now, retail remains a sector with momentum, but one increasingly at the mercy of forces far beyond the shopping centre.

Natural disasters are changing attitudes to long term property values

Australian property values usually rebound quickly after natural disasters, but not this time

Strong consumer spending and tight supply have driven retail to the top of commercial property, but signs of pressure are starting to emerge.