Darwin

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The Smartline Report – February Edition

The month in review: Darwin

By Herron Todd White
February 2015

With the highest rate of economic growth and the lowest unemployment rate in the country, the Northern Territory seems to have the fundamentals right for a continuation of the stellar returns experienced by residential property owner-occupiers and investors in recent years. Unfortunately (for existing property owners at least), behind the numbers the story is a little different, with subdued growth a more likely outcome for most sectors.

While there has been steady population growth in the greater Darwin area in recent years, investment activity has been underpinned by high rental returns from fly-in-fly-out and contract workers employed on resource and infrastructure projects and by (often subsidised) Defence personnel, resulting in the highest rental yields in the country. 2013 and 2014 saw the completion of a number of unit developments which were sold overwhelmingly to investors and had the major project factor priced into the selling prices. This has considerably eased the rental market with demand having been met.

Although median unit prices have increased in inner Darwin (up 10% year on year to $538,650), this does not reflect a general upswing – rather the high volumes of good quality new stock on the market and the settling of sales negotiated in past years.

Sales of new dwellings (houses and units) and of vacant land have also been bolstered by concerted Northern Territory government policies targeted at increasing the housing supply. Land releases and new builds in Darwin’s northern suburbs and Palmerston have proven more affordable due to smaller lot sizes and subsidies have been provided for new home purchases (and removed for existing homes). As a result, 935 titles were issued in the greater Darwin area in 2014, the highest number ever and a 38% increase on 2013.

Median house prices in both Darwin and Palmerston have stabilised to 2013 levels and there seems little expectation of a rise in the short term. Continued land releases and incentives should support demand for new product from young families and upgraders, particularly in Muirhead and the more upmarket Palmerston suburbs like Durack Heights, Zuccoli, Johnston and Bellamack. Proposed new unit developments may continue to prove popular with owner-occupiers, especially if they are affordably priced. Good news for builders and purchasers. Not such good news perhaps when it comes to selling however. This has certainly dampened the market for owners of existing stock hoping to sell or upgrade, with land value plus renovation or construction costs likely to exceed market value for existing properties for a while.

And for investors? With a number of projects either winding up or moving into less labour-intensive stages, there was a reported exodus of workers interstate in the latter half of 2014 due to seasonal weather and labour requirements. The most recent REINT publication reported a 4.7% vacancy rate for units in inner Darwin and northern suburbs in September 2014 (double the 2.4% recorded at the same time in 2013, when the market was severely stressed and bidding wars were taking place on available rental stock) and 4.3% for Palmerston
units. House vacancy rates had also increased on 2013 levels. CoreLogic RP Data indicates a slight year on year decrease in both house and unit rents between December 2013 and 2014. Seems like a good time for tenants to renegotiate lower rentals, before the town fills up again!

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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