The month in review: Darwin
By Herron Todd White
2016 will be remembered as the year that the Darwin property market underwent a large correction. The general perception at the start of the year was that the market was declining. However, the big surprise to all parties involved in the Darwin property industry was just how large a decline we saw. Year on year to the September quarter, median dwelling prices throughout Darwin dropped 9.2% and sales volume decreased 17.1%. The unit market also decreased with median prices dropping 7% and sales volumes down 12.4% (CoreLogic RP Data).
The number of houses sold for the financial year fell below 1999 levels, based on REINT data, with just 820 houses sold in greater Darwin. Unit sales were around 2000 to 2001 levels with 850 sold. Overall that’s a drop of 42.9% in volume from last financial year.
Although no sector of the property market was immune to the decrease there were some sectors that particularly felt the pinch. The secondary market of Palmerston was hit hard with both sales volumes and median price points down. The unit and townhouse market decreased by 11.6% in median price and 17.6% in sales volume year on year up to the September quarter. The dwelling market was also similar with a 13.7% median price decrease and 27.1% sales volume decrease year on year. This was driven by Greenfield development in areas such as Zuccoli that offered attractive house and land packages backed by government and developer incentives such as cash back agreements on land purchases and guaranteed rental incentives.
CBD units also struggled this year as existing stock had to compete with new stock brought onto the market. This new stock was sold with either a home owner initiative to purchase new property backed by the government or developer incentives such as furniture packages or rental incentives. The yearly figures show a median price drop of 2.7% and sales volume down 13.8% year on year to September.
Although this does not seem to be a drastic decrease in median prices, off-the-plan sales have kept this market relatively stable in comparison to other sectors. However, these figures do not indicate the severity of the drop that we have witnessed this year in this sector. One example that stands out is the sale of a 2-bedroom unit in the fringe Darwin CBD suburb of Larrakeyah. The property sold in the low $300,000s this year. The most recent sale in the complex before this was at the end of 2014 (approximately 18 months earlier) for mid $400,000.
Unfortunately this was quite common for the existing CBD unit market and this stock showed a large decline in value and lengthy periods of marketing, similar to the above example. The rental market also remained soft as 2-bedroom unit rents were down 6.3% year on year.
The traditionally more stable northern suburbs dwelling market also experienced a decrease with median prices down 1.8% year on year to $550,000 in the Sanderson Local Government Area (LGA) and the Nightcliff LGA down 13% year on year to $600,000. Sales volume also decreased in the Nightcliff LGA, which declined by 12.2% from the previous year whilst the Sanderson LGA has remained unchanged. Although this sector did not experience the drop in prices that Palmerston and the CBD did, it remained stagnant for much of the year with certain sectors of the market starting to open up and large gaps in sales evidence appearing. For the first time in many years we are seeing detached dwellings being sold for under $400,000.
Although the unit market did not fare well for a majority of the year there has been a slight glimmer of hope as the last quarter showed a lift in median prices year to year with the Sanderson LGA up 3.8% and Nightcliff up 3%. However, sales volumes were down with a reduction of 62.5% and 4.8% for each area.
The two major driving factors that had an impact on the Darwin property market were continued supply and the two elections. From the start of the year there had been much discussion about the impact that the removal of the First Home Owner’s Grant on existing property has had on the market. The Country Liberal Party (CLP) did attempt to stimulate the market by providing start up grants up to $2,000 to assist in renovations and also re-introduced stamp duty concessions prior to the election.
However, the carrot was much larger with the Labour government as they are now offering $10,000 startup packages and stamp duty concessions for existing property up to $650,000. The general perception after the election was that the market would start to gain momentum and transactions would start to occur in some areas of the market and we witnessed some immediate uptake of this grant, mainly for semi-detached and attached units in the northern suburbs. However, other areas have taken some time to get going, particularly Palmerston. Overall, we are now starting to see more contracts come across our desks and sales agents are reporting that buyer enquiry is up and more numbers are showing at open for inspections. Hopefully this might indicate a better 2017 for all parties involved.
The continual oversupply of units in the Darwin CBD also impacted on the median price point for 2016, especially for existing stock due to the incentives discussed previously. We also witnessed a similar trend for existing houses in Palmerston having to compete with the latest development of Zuccoli Aspire. Over the year we witnessed building contracts becoming cheaper and land has become more affordable. Combined with the incentives discussed previously this created the situation whereby it was more affordable to purchase or build new homes in comparison to purchasing existing homes.
Although it has been a tough year for the Darwin property market there is always a silver lining as now is a great time to buy. Taking into account the above mentioned incentives offered by the government and record low interest rates, Darwin can now potentially start to be a more attractive place for younger people to stay as it has become more affordable.
Find out more information and to chat with a local Mortgage Broker in Darwin.