By Herron Todd White
2020 is shaping up to be a continuation of the previous tough few years for the Darwin residential property market with a number of factors still contributing to the current financial position of the Territory. With some long-term projects getting the green light and more in discussion, the flow on effect will not be seen in 2020 and sentiment will continue to remain weak across the residential market and wider economy in general.
With the completion of the construction phase of the Ichthys Gas project and remaining construction workers now onto the next project, the focus shifts to what is next for Darwin and the Territory overall, as new projects are needed. The $200 million CBD revitalisation including the newly announced CDU campus is well underway. It is hoped that with a more vibrant city as well as more bodies on the ground, will have a flow on effect for businesses and therefore uptake in CBD dwellings. This will have a direct positive impact on the residential unit market, with increased demand for rental accommodation in the CBD.
Further projects such as the announcement of the $400 million ship lift facility, the $1.05 billion Todd Gold mine construction, $200 million Westin Hotel project, the $1.45 billion project Sea Dragon prawn farm and the longer term $20 billion sun cable project in Tenant Creek due to commence in 2023 that will supply 20 percent of Singapore’s electricity. While these are positive announcements and major drivers of the economy long term, it is difficult to see an immediate positive impact in 2020 on the residential property space.
Looking at sales figures across 2019 it becomes clear that while sales volume appears to have increased particularly through the back end of the year, we have not seen any increase in equity and in most cases people are in a negative equity position. While property prices remain low it makes it more difficult for local or smaller investors to re-enter the market and add to their portfolio. The REINT have reported that median house price as at the end of Sept 2019 of $460,000 is in line with 2009 prices, while median unit prices for greater Darwin of $294,000 is in line with March 2007.
Looking into the Crystal ball for 2020, we see the most action in the residential market will be first home owners. As prices continue to soften and in conjunction with the newly released First Home owner deposit scheme, we believe that some of the saturated unit market will be absorbed by first home owners and entry level homes due to the low price point. This Federal Government scheme, which allows a purchase for Territory dwellings of up to $375,000 with a five per cent deposit, should take some of the lower price point stock off the market.
The grants on offer certainly are not limited to first home owners. Currently in the territory we have on offer, a $20,000 build bonus scheme if buying or building a new home from February 2019, limited to the first 600 applicants, a first home owner grant of $10,000 on new homes, Territory home owner discount, with up to $18,500 off stamp duty on the purchase of either a new or existing home for new home owners in the Territory and finally a $10,000 home renovation grant if buying your first home is an existing dwelling. Only 200 of the 600 build bonus applications have been exhausted so there remains a strong stimulus to still be seen in the market.
It’s not all doom and gloom! Darwin presents great opportunity for the investor market with the highest yields for any capital city in the country. Investors can typically expect a gross return of over five per cent across both units and dwellings and with the lowest median house prices in the country at year end 2019, the entry into the property market is easier and in most cases a positively geared asset.
Speak with a Darwin Mortgage Broker today.
DISCLAIMER: The information contained in this article is correct at the time of publishing and is subject to change. It is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, Smartline recommends that you consider whether it is appropriate for your circumstances. Smartline recommends that you seek independent legal, financial, and taxation advice before acting on any information in this article.