Darwin December 2017

The month in review: Darwin

By Herron Todd White
December 2017

2017 has proven to be a difficult year for all participants in the greater Darwin residential market, however as we approach Christmas there are some green shoots popping through. Unit prices have continued to decline on the back of significant supply through 2015 and 2016, extensive land supply has placed pressure on exiting housing markets and the looming completion of the construction phase of the Ichthys project is drawing nearer. According to RPData, 53% of all unit sales through June 2017 were sold at a loss from the previous sale price. This clearly highlights the pain being felt in the market place. The green shoots in the market place are in the detached housing market. REINT data as at September 30, show that sales volumes are up 6.7% year on year, so while there is a large decline in value we are starting to see the market tick over again, as in previous recoveries it all starts with sales volumes.

For the first time in as long as the writer can recall, there won’t be any tower cranes in the sky at Christmas in the Darwin CBD. The residential construction industry has slowed significantly, which has come on the back of less enquiry from interstate investors (currently active in Sydney and Melbourne), difficult financing conditions, and the years of previous supply. So looking forward, this will ease the pressure on the existing unit stock without further supply to an already saturated market.

Vacant residential land has continued to hit the market place through 2017. The final stages of Muirhead in Darwin’s Northern Suburbs have reached the market. Zuccoli continues to provide a mix of small to medium sized allotments in Palmerston, and the Halikos constructed development of NorthCrest in between Darwin and Palmerston has provided a new supply of allotments with titles expected in very early 2018.

The Palmerston market has seen a number of changes through 2017, First home owners are increasingly moving into brand new house and land packages, with the availability of small residential allotments circa 300 square metres. First Home Owners are choosing a house and land package against the previous preferred strata title duplex or townhouse option. This has left the strata unit market in a precarious position in Palmerston, with limited population growth and a strong supply of dwellings, the unit market has suffered heavily.

The population in Darwin remains relatively transient and renting remains a very popular option. RPData shows that rental yields in Darwin for both units and dwellings remain the strongest in the country, a position which has long been held. As at October 2017, gross rental yields are sitting at 5.8% for Darwin, compared to Sydney of 3.1% and 2.9% of Melbourne, so while the capital values are down in a relatively low cost financing environment, Darwin remains a viable investment option.

The difficult year that has been endured through 2017 for the market was not unexpected, business confidence (locally) is down and residential construction and investment activity tracks so closely to the overall performance of the economy. The positive signs are the increased sales activity and while for many participants these sales are confirming a loss, it does provide opportunities for first home owners and there has been a marked reduction in cost of living pressures. So while it has been a hard year, we can head into the Christmas break with a firming confidence of what is to come.

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