Darwin April 2018

The month in review: Darwin

By Herron Todd White
April 2018

The Darwin property market, like most small markets in Australia, is primarily driven by employment opportunities in the main industries such as mining, tourism and government. The latest growth phase of the Territory market can be largely attributed to the two major gas projects in the form of Conocco Phillips in 2006 and more recently the Icthys Inpex Gas Plant commencing in 2011. Unfortunately, such is the age-old story, small towns can’t boom indefinitely, and Darwin is no different. Residents and business owner’s experienced a significant downturn in 2014 with the worst market performance since 1974’s Cyclone Tracy levelled the tropical city.

It doesn’t take a property expert to see the Darwin market is close to or at the bottom of the market, with capital values and transactions down considerably from 4 years earlier. This is no more evident than in the over-saturated unit market in both the Greater Darwin and Palmerston areas. Recent REINT analysis for the end of 2017 has posted a substantial fall in the weekly median rental rate by almost 20% from the previous quarter and down 30% from a year prior. The median rent for an average 2 bedroom unit can be rented for approximately $360 per week. (REINT: Dec 2017)

Whilst capital values have experienced a significant decline, rental yields remain somewhat steady, with limited decreases in this respect, hovering at around a 5% gross yield. These market characteristics are quite attractive for investors, and with prices skyrocketing in the large southern markets of Sydney and Melbourne, Darwin may be the next profitable investment. Tightened lending practices on the back of Royal commission investigations may stem the tide of potential interstate investment, however.

With regards to standard dwellings in the Greater Darwin region, overall figures have indicated a slight stabilisation in the market, posting a 4.8% increase in sales volumes for the final quarter of 2017. Palmerston has also felt positive effects towards the end of 2017, up 11% from the previous quarter. These figures are positive signs however the market is still in a considerably weaker state from the same period in December 2016.

The Northern Suburbs represents a large proportion geographically of Darwin, located approximately 10 kilometres from the Darwin CBD. This segment of the market is dominated by owner-occupiers and a sizeable portion of first-home buyers. Those who weren’t able to afford a house in earlier times have now the purchasing power, with a 3 bedroom 2 bathroom in an average 1980 built Northern suburb house recently selling for $360,000. This region is littered with ex-government dwellings, perfect for those looking to enter the housing market.

In terms of rentals, an average 3 bedroom dwelling in this area can be rented for approximately $490 per week. (REINT: Dec 2017) Historically low-interest rates have had limited direct effects on this segment of the market, with general population growth and employment opportunities proving the crucial factors.

Despite fairly tough property market conditions, the unemployment rate in Darwin has stayed below the national average at 4.6%, and population levels have steadied with a slight increase of 0.2%. These figures, coupled with an improved vacancy rate of 6.8% and a slight increase in house sales indicates the Top End property market may be stabilising, if at a significantly lower level.

Dwellings in the inner Darwin area reflect this improvement with an 8.3% increase in median capital values from December 2016 and a jump in sales volumes by almost 30%. This can’t be said for inner-city units, unfortunately, which appear to be still decreasing. The segment dropped another 25.8% a year on from December 2016 in terms of sales volumes and a 12.9% decrease in median prices, now at $460,000. (REINT: Dec 2017).

We consider the overall residential market to remain relatively flat throughout 2018, with no confirmed substantial projects on the horizon to boost employment opportunities in the Territory, and in turn the property market.

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