Darwin

The Smartline Report – December Edition

The month in review: Darwin

By Herron Todd White
December 2015

As 2015 draws to a close we reflect on the Darwin market for another year. It was predicted to slow and it did exactly that. Overall the market didn’t see a drastic decrease in the median house price, only down 0.7% compared to this time last year and the unit median price down 3%. The most alarming statistic to come out of the REINT quarterly publication was that recorded sales of houses was down 28.9% and units were down a whopping 64.1% from this time last year. The major factors impacting on the market up north are the removal of the First Home Owner Grant (FHOG) from existing properties, decreased rental levels and subsequently fewer investors in the market.

As of 1 January 2015 the FHOG was no longer available on existing properties, with new builds still eligible to receive the $26,000 incentive. This came at a bad time as the market was showing signs of easing coming into 2015 and now nearly 12 months on, the full effect has been felt. Properties that were generally sourced by first home buyers are being forced to sit on the market with extended selling periods and either having to take price reductions to attract buyers or are being withdrawn from the market entirely. The worst affected are the older properties and in particular dated units. Although the statistics don’t show a great fall in the median price, this has been held up as a large majority of the sales have been of new stock, including properties settling off the plan that were contracted prior to 2015. Unfortunately the first home buyers who got in prior to 2015 and bought existing houses have had a painful year watching their new hard earned asset fall in value, adding to their financial stress.

Over the past 12 months the median rent for a 3-bedroom house in Darwin has come back 14.9% to $556 per week. Rents rose quickly over the past few years as there was a large influx in the labour force in the NT due to the Inpex gas project fly-in-fly-out workers based in Darwin and continued demand from the defence force and subsequently all the other sectors felt the positive spin off effects of the population growth. The demand greatly outweighed the supply of accommodation available pushing rents to all time highs and making Darwin the highest rental yielding capital city in Australia. As the construction phase of the Inpex project draws closer to an end and mining industries remain relatively quiet, the rental market has eased giving tenants a bit of much needed relief.

As rental levels have steadily fallen over the year, investors have quietened as a large player in the Darwin market and owner-occupiers have managed to get a strangle hold back on the market. As interest rates are increasing for investors making investment in real estate less desirable, funds are being directed to other investment opportunities.

With Christmas fast approaching, it seems every property vendor on the market has a story, from losing their job, marriage settlement or just simply too hot and they are escaping south. There is a sense that only people who really need to sell are on the market and are often being pushed to accepting less than they paid for the property only a year or two ago. Cautious owners though are willing to sit on their hands and ride out the market.

As the market conditions changed in favour of buyers in 2015, we have seen developers become craftier at attracting buyers, offering incentives such as settlement discounts. Properties are being sold with handsome long term rental agreements such as the Northern Territory Government’s Real Housing for Growth scheme, or there is help with stamp duty costs and many more. The new estates such as Zuccoli that has numerous developers all competing to attract buyers, has significantly lowered the entry level price for vacant land. Similarly, builders are offering cheaper build contracts to win work as it looks to be survival of the fittest.

There were few highlights this year but as predicted the prestige markets held relatively steady both in town and in the rural sector specifically Howard Springs and Virginia. Residential property took a confidence hit this year, opening up more opportunities for home owners as investors took a step back. Darwin being Darwin, it doesn’t take much to spur on the property market. Coming into 2016 with an election looming and foreign investment becoming a big player we are certainly in for interesting times ahead.

Alice Springs
The Alice Springs market continued to experience soft conditions throughout 2015, in part attributable to the removal of the first home buyer’s grant for existing dwellings at the end of 2014. It was not all doom and gloom however, with some sectors performing well.

Older units really felt the soft conditions, with reductions in values evident, particularly for 2-bedroom units built circa 1980. New units fared a lot better, such as the new South Edge Development which sold to owner-occupiers and investors via the Real Housing for Growth Scheme, offering gross yields in excess of 6.5%.

The upper end of the market continued to see some good turnover, particularly for renovated homes. The pick of the sales from Desert Springs for 2015 was in Hillside Gardens which saw a 4-bedroom, 3-bathroom renovated home sell for just over the $1 million mark.

www.smartline.com.au

Please note that information in this publication is subject to change without notice. Smartline assumes no responsibility for any errors, omissions or mistakes in this document. © Smartline Home Loans P/L 1999 – 2015. Australian Credit Licence Number 385325

 

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