Would you buy in a flood zone?

[ozi]

Hi all,

I'm currently looking at a property in Melbourne which is in a council designated flood zone (1 in 100 years). Looking at council planning scheme maps, the flood zone surrounding the property is quite narrow (around 70m) and given the road is fairly level tells me the depth of the flood area isn't too great. The house is also raised a reasonable amount from the ground.

Should I be worried? I'm just wondering what peoples thoughts are on such properties. Would you consider buying something like this? I know the risk of flooding is quite low. I am more concerned about the following issues which may or may not be likely:

1) Higher insurance premium? Will it be difficult insuring such a property?

2) Less capital growth than properties which aren't in the flood zone. Even though flooding is unlikely, the Section 32 clearly states the risk of flooding and is also covered by a 'Special Building Overlay' as a result, which would mean a planning permit is needed for any building or works. This may scare of potential buyers.

Anything else I may have missed?

Regards,
Ozi

 

[ozi]

Oh, just found another potential issue:

3) Finance! Would it be harder to finance property in a flood zone? I've heard that getting above 80% LVR could be dificult, depending on the location and risk obviously.

Can any of the friendly brokers here confirm this?

Regards,
Ozi

 

[hobo-jo]

I work at a bank selling insurance and as far as I'm aware 'flood' is an exlcusion and think you would find it an exclusion on most building/contents policies. I don't think it will be difficult insuring the property (in a general sense), but you wouldn't be covered for the effects of a flood in a standard policy. Perhaps there is special floodcover that you can purchase?

[edit] http://www.floodsmart.gov/floodsmart/pages/inscenter.jsp

 

[ozi]

Hi hobo-jo,

Thanks for the link. I'll need to take a closer look at the insurance side of things. I suspect you are right regarding the exclusions on flooding.

Regards,
Ozi

 

[Ricardo29]

flood is an exclusion on 'most' policies, but there's enough companies that do cover flood.
eig, vero, aust unity.
mainly broker policies though so might be easier using one.
no real impact on price...if a policy is $500 you'll find its $500 with flood, or maybe $550. not really an issue. you specify your postcode and if its fits their computer system it fits and you get cover - no one asks and you dont have to tell that "oh gee, it might flood one day".

 

[ozi]

Thanks Richardo.

Ozi

 

[Peter 14.7]

Ask yourslef What is the real risk.

Somes times flood maps are out of date. Works upstream and dams changing the flow.


My new development block is floodable and we will simply build higher and think about the contruction technique.

Having said that permanent changes in climate means our local creek has not flooded for twenty years and presently has stopped flowing and stagnant.

Look at the catchment risk and consider it all on merits I say.

Peter 14.7

 

[Bloss]

We have a few houses in Rockhampton that are in flood, but all are high set QLDers, and none have ever had water near the floorboards so we are not concerned about flood damage.

We also had no problems on finance purchasing these.

Because they were in flood, they were purchased cheap and have increased more % wise than any of the properties we own, and return a better rent for outlay than most as the tenants don't care if it floods 1 in 100 years.

Two of them have great water/river views and flood just like Brisbane did in 1974, and we paid about 1974 prices for them.

Bloss

 

[ozi]

Thanks Peter and Bloss.

I really don't see any risk of flooding. The property is no where near a river or anything like that. I think the reason the council have identified it as a flood zone could be due to drainage issues. The maps could very well be out of date, this is something I haven't checked. Who knows when the land was area surveyed. I am more concerned about finance, insurance and capital growth as a result of the flood zone.

You've given me some more things to think about, so thanks.

Regards,
Ozi