The month in review: Darwin
By Herron Todd White
2018 is shaping as a difficult year for the Darwin residential property market. A number of factors are at play which all will have differing impact on the market. The obvious overhanging point in the market is the completion of the construction phase of the $34 billion Ichthys Gas Project, second is a slowing of construction within the area, third we look to tightening lending practices enforced from APRA to lending institutions, particularly towards Investors and last is the continued supply of residential land.
The jury is still out whether the Ichthys gas project has been good for the Darwin residential market. The latter part of 2018 will see a large wind down in the number of workers on site, many of these have been FIFO and residing at the Howard Springs Worker’s camp, however many have taken permanent occupation in local suburbs. As the workers leave town there will be a need to back fill the large numbers of CBD apartments, and the dwellings which are occupied in suburbia. Without another large infrastructure project on the immediate horizon it’s expected that this will place downward pressure on the existing rental market, and increase vacancy rates (currently sitting at 5.9% Darwin).
Construction has visibly slowed in the greater Darwin market. As we write this article there are no towner cranes in the Darwin CBD, and as we understand there is little planned high rise or large scale residential construction projects in the pipeline. In a small market such as Darwin, the presence of cranes has a strong impact on the market. Driving passed construction sites provides strong sentiment of good times, building means jobs, investment and economic spin off. Planned for 2018 in the Darwin CBD is the 6 star hotel at the Darwin Waterfront to be constructed by Land-Bridge group, and a new headquarters for the Department of Health. These projects will provide jobs however will not add to the supply of long term residential accommodation.
Investors take up a large proportion of the Darwin market. CBD and inner suburb apartments have long been a safe bet for investors, RPData shows that gross yields for the greater Darwin market are at 5.9%, which is the highest for any capital city in the country. The publicity around investor lending has been strong and loud, the push back and tightening of lending policies for the Australian lenders will have an impact on the Darwin market. With a population of c130,000, the greater Darwin market has relied upon interstate investors to drive demand for the transient population. As funds for investment lending continue to dry up, we suggest that off the plan sales and unit sales will be quite difficult to come by.
The fourth factor for the Darwin market in 2018 as we see it is residential land supply. North Crest is the newest master planned suburb to hit the Darwin market, the old Berrimah farm located in Berrimah, half way between the Darwin CBD and Palmerston. North Crest is a brand new, 168 hectare green filled site which will provide up to 2,000 single lots and 1,000 other accommodation types in an expected 13 year project life span. North Crest includes open space, one government school site and very good access to public transport. First titles will be issued in quarter one 2018. This site will have a positive impact on jobs and construction of new dwellings and continued government incentives for first home owners will drive demand on the small allotments.
In Palmerston, land supply will continue in Zuccoli. There are a number of years supply available there, and with infrastructure, neighbourhood centres and population increasing, it’s likely to continue to develop into a thriving location.
2017 was a tough year in the Darwin residential property market, unfortunately this writer doesn’t have a magic wand to turn the market around. Without doubt there will be green shoots in the market place, the northern suburbs already appear to be bouncing back with increased volume and buyer activity and the inner suburbs just keep keeping on. In any market there are always opportunities and right now there are very good buying opportunities in the Darwin market.