The month in review: Darwin
By Herron Todd White
As we near the mid way point of 2016, there is not a lot to cheer about in the Darwin residential property market. The market started to come off some 18 months ago, although 2016 appears to have seen the worst of it. There isn’t one specific factor that singlehandedly changed the market direction; it appears to be numerous factors working simultaneously on a micro and macro level, creating great uncertainty in the market.
On a local level, the removal of the first home owners grant (FHOG) on existing property at the end of 2014 had an immediate impact on older unit stock that was usually a popular entry level property for first home buyers. Most notably older units in Palmerston felt the pressure first, sales evidence showing a unit purchased at the height of the market at the start of 2014 is now worth 25% less some two years later.
As promised by the government, a large amount of land has been released over the past few years to ease property prices and with the FHOG’s only being available on new stock, this became a more appealing option to young buyers.
With most of the new estates such as The Heights, Durack, Bellamack and Muirhead now complete or on their final stages, the majority of the available land can be found at Zuccoli. Sales of vacant land have eased and prices have come back as developers try to attract people into the market.
You can’t talk about the property market in Darwin without mentioning Inpex and the phenomenon it created. A large supply of workers arrived on Darwin’s doorsteps some years ago needing a place to rent. The injection of people to the population was so rapid, rents sky rocketed with people willing to pay above market to secure a roof over their head. Developers, excited by the high demand and limited supply, began construction but Rome wasn’t built in a day. The delay of the new stock meant we had to ride out the high rentals until the new stock became available. Fast forward to mid 2016 and final touches are being put on some of the brand spanking new units in town ready to be occupied but rents have fallen and there are very few investors in the market. Many of the pre-sold units are already worth less than their initial purchase price.
On a broader scale with mining quieting down, activity across the equator in China easing and banks tightening up their purse strings, Darwin has felt the effects like the rest of Australia. All as the Reserve Bank of Australia announces another interest rate cut trying to inject some stimulation into the economy.
Unfortunately for home owners in the top end, no one has been immune to the falling market with sale prices coming back and more worrying the volume of sales down a dramatic 31.6% (REINT RELM) from March 2015 to 2016.
Unfortunately there is no silver lining at this stage. We don’t know if we’ve hit rock bottom yet and there isn’t any big project on the horizon to spur on the market again. With both Federal and Territory elections scheduled for mid year, it’s safe to say we are in a wait and see period.
It has been more of the same in Alice Springs following the removal of the First Home Buys Grant for existing dwellings in December 2014. Low transaction numbers are having a significant impact on the market, particularly at the lower priced entry level segments. There were only 339 sales in the broader Alice Springs market in the year to March 2016, down from 480 in the previous corresponding period and down significantly from the mid 2000s which saw sales numbers in excess of 700 per annum.
There are positives however, with the new development at South Edge nearing completion and sold out featuring 2-bedroom, 1-bathroom townhouses ranging from $335,000 to $380,000. Other areas performing well are in rural residential with four settled sales in excess of $750,000.
The golf course area (Desert Springs) also performed well with four sales in excess of $750,000. A renovated 3-bedroom, plus study and 2-bathroom rendered brick dwelling transferred at $830,000 (pictured below) and a rural residential property is currently under contract (advised unconditional) at $1.25 million.
The upcoming election will be important for the local market which does not have any incentives for first home buyers for entry level properties such as older style units and houses under $500,000 both of which have experienced significantly lower sales volumes.