If you’re buying a house near a river or on a floodplain, you will likely come up against the question of flood risk. We usually talk about this in terms of chance.
Houses close to the river might be at risk of a 1-in-100 year flood, meaning there’s a 1% chance a flood could hit in any given year. Houses further back might be at risk of a 1-in-500 year flood (0.2% chance). Truly extreme floods might be 1-in-1,000 or even 10,000 years. This way of thinking about flood risk is technically known as an Annual Exceedance Probability (AEP).
What does flood risk translate to? Our recent research found houses in the New South Wales town of Richmond with an AEP of 100 – meaning a 1-in-100 year flood – come at a discount of almost 11% compared to similar homes without the risk. We are prepared to pay less for houses we think might flood.
