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Darwin June 2017
The month in review: Darwin
By Herron Todd White
2017 has brought a continued softening in the property market for Territorian home owners across the board, however renovating is still seen as an attractive option for many. This can be partly attributed to local government incentives put in place from February 2017. First home buyers can take advantage of the Home Renovation Grant which provides a voucher worth up to $10,000. The Home Improvement Scheme offers another incentive to work on the property where a further $4,000 can be received (with at least half the job paid by the owner themselves for a total value of job of $8,000). The voucher is valid for renovation work costing up to $20,000.
A key renovation hot spot in the Darwin region is the northern suburbs. Located approximately nine kilometres from the CBD, this area has a large proportion of older houses (built from 1960 to 1985) and these dwellings provide a solid starting platform for those looking to renovate. The northern suburbs comprises predominantly owner-occupiers, with the purpose of renovation generally to upgrade their standard of living and hopefully increase the value of their property. Investors in the area generally renovate to protect the life of their investment, increase possible rental yields and decrease the amount of regular maintenance required on the property.
Entry level stock of very dated condition is available in this location for approximately $280,000 to $370,000. Renovations to this type of stock generally range from cosmetic changes such as a new bathroom or kitchen to extending or building under an established roof line. Renovated dwellings (depending on the level of upgrade and when the work occurred) can achieve upwards from $400,000. Another excellent upgrade-able option in this area is an elevated dwelling. While being characteristically Territorian in nature, this design offers good opportunities for extensions, with many owners building under and subsequently increasing the amount of bedrooms or bathrooms in the property. This type of renovation has the benefit of having the structure already in place and is therefore an economically viable option. Unit renovations are not as common however do occur in the northern suburbs. Upgrading the unit by increasing it from a 2-bedroom to a 3-bedroom is an excellent way to increase value as the unit will enter a slightly stronger sector of the market. This would benefit either investors or owner-occupiers, with stronger rental yields achieved or a possible capital gain respectively. Upgrading the floor coverings is another good option for first renovations as this greatly increases the overall appeal of the property. These renovations may be very difficult to achieve however due to body corporate constraints in place.
Looking further from Darwin, the rural residential area and Palmerston City follow a similar trend, with most renovations occurring to older dwellings by owner-occupiers to increase the standard of accommodation or dwelling size. Palmerston is a newer city than Darwin, with the majority built from 1985 onwards and therefore there is significantly less renovation work occurring. Most work is focused on the construction of brand new dwellings in suburbs such as Durack and Zuccoli. Generally older stock found in the original suburbs of Gray, Driver, Moulden and Woodroffe would be the main areas of renovation activity. An entry level property in this area can be purchased from $250,000 to $300,000 with renovated properties achieving values of $300,000 to $500,000 based on the amenity and location.
Home owners looking to renovate themselves can make significant savings, however this pathway can be fraught with danger. It is recommended for larger items such as extensions that all work is signed off by a certifier to protect against insurance hassle in the future. Darwin generally has higher trade costs compared to larger serviced cities, which does make it difficult for a profitable renovation to be achieved. Therefore work completed by the home owner as opposed to hired tradesmen is where significant savings and profit can be generated. An area to be wary of for those improving their property is the differentiation between maintenance and renovation.
While a new hot water system may be required to preserve the life of the asset, this does not necessarily transfer to an increase in value. Over-capitalisation can occur if this is the case, especially in the current economic climate.
Another key limiting factor for renovations in the Northern Territory is centred on the significant costs relating to the removal and treatment of asbestos. This hazardous building material is present in almost all dwellings built before Cyclone Tracy and a fair proportion of dwellings built prior to 1986. This material is very costly to remove, and should only be handled by accredited asbestos removal professionals.
The residential property climate heading into the middle of 2017 for the Territory is a continuation of the depressed market values of 2016. Recent RELM figures have revealed a drop in overall sales volumes by 13.2% from the December 2016 quarter to the first quarter of 2017. Units are no different, with sales down 22.5% from the same period respectively and a continued over-supply and severe lack of demand. Those looking to enter the housing market still have ample opportunity, with median house prices and unit prices down 10% and 14% respectively on last year’s figures. The Northern Territory government has recently been releasing surplus stock in the form of auctions which provide excellent opportunities for first home buyers looking for a renovation project. This calibre of housing commission stock can be purchased from as low as $280,000.
DISCLAIMER: The information contained in this article is correct at the time of publishing and is subject to change. It is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, Smartline recommends that you consider whether it is appropriate for your circumstances. Smartline recommends that you seek independent legal, financial, and taxation advice before acting on any information in this article.