The month in review: Darwin
By Herron Todd White
2016, the year ahead for Top End (Northern Territory) property is unfortunately not full of rainbows and lollipops. After pushing through 2015 there is some relatively unknown for what lies ahead or what will be the next big thing. The residential market has been driven towards new product for an extended period of time, strong Government incentives, new land releases and a significant degree of new unit construction has filled the market with a plethora of options for buyers and tenants alike.
A large concern to the market through 2015 was the significant drop in sales volumes (29% for houses in Darwin and Palmerston and 62% for units and townhouses in the same areas). With a sting out of the market it has been difficult for sales agents to drum up urgency and we would expect that there will be a more of the same through the early parts of 2016.
While rental yields remain relatively strong in Darwin, hovering around the 4.5% to 5% (gross) the concerning point will be the vacancy rate. In December 2015, the REINT reported the Darwin unit and dwelling rate at 8.9% while a touch firmer in Palmerston at 5.9%. With some larger developments still due to title, the property market will be looking to the NT Government for further infrastructure stimulus or incentives to attract workers back to the Territory.
Cranes still hovering in the CBD and the residential sub-divisions of Muirhead in the north and Zuccoli to the south will continue to generate the majority of residential construction through 2016. Defence House Authority (DHA) has committed long term to Muirhead/Lyons, while first home buyers and investors continue to flock to house and land packages in Zuccoli.
The activity hubs of Casuarina Shopping Centre, Gateway Shopping Centre in Palmerston and the Coolalinga Shopping Centre in the rural area, will continue to grow through 2016. Eager eyes on these locations will continue to provide spin off for residential construction as residents of the top end traditionally support shopping centres well.
The existing unit market, particularly within the CBD is an opportunity that may present a bargain or two for first home owners and tenants looking to beat the rental cycle. After a very obvious softening of this market over the past 12 months, 2016 may bring some opportunistic buying in older complexes with large floor plates that are ready for a make over or fresh start.
With further lanes added to Tiger Brennan Drive, the daily commute from the rural area is getting closer and closer. The rural residential suburbs are ever changing with the introduction of some smaller allotments and a slight shift of mindset from the need for a traditional 5 or 20 acre block. No doubt this will be an area to keep an eye on in 2016 for sub-division and clever design techniques to maximize space in popular locations.
And without a doubt a big talking point in the property market through 2016 will be the NT election and the usual questions will be posed; What about a land tax? Abolition of stamp duty? Will we see the re-introduction of First Home Owner Grants? Another talking point will be the introduction of new planning legislation from the planning commission which may unlock some larger, older parcels of land for more compact design and new development.
All in all 2016 is likely to be a pretty tough year ahead, the halcyon days of 10% growth year on year may have passed and while it is not all rainbows and lollipops on the horizon there is always a gem in every market.
After a very poor 2015, the Alice Springs market is set for a quiet year ahead, with low confidence levels set to remain due to the absence of a First Home Buyers Grant for existing dwellings which was removed at the end of 2014.
That said, there will be a release of vacant land at the South Edge Development, with prices starting at approximately $160,000. This development, combined with the KiIgariff subdivision further to the south provides an opportunity to secure the First Home Buyers Grant and enter the new dwelling market.
Lower end units performed particularly poorly in 2015 and in many cases provide buyers with opportunities at price levels not seen since 2009. However, given the poor performance, these opportunities should be treated with caution due to the lack of depth in this market and significant new potential supply in the broader market, i.e. should the Melanka and Bowling Club developments proceed. In addition to supply issues, this market is also currently experiencing continued downward pressure on rents and higher vacancy levels.
So there is plenty to watch in 2016. With no clear direction evident and with an election looming, eyes will be closely watching what is on offer to the property sector.