The month in review: Darwin
By Herron Todd White
In spite of being able to offer stellar returns to investors and residential property owner occupiers over recent years, the first half of 2015 has witnessed a slow down in Darwin’s property market. The greater Darwin region has seen a steep drop in sales activity for houses, units and townhouses. One of the main factors contributing to the slump is the new First Home Buyers Grant (FHOG) policy that kicked in whereby first home buyers are restricted to contracts to construct or purchase a new home or unit. As a result, the new policy has begun to create two segment markets whereby a significant increase in new housing stock has taken place and established homes, mainly in Palmerston, Sanderson and Nightcliff LGA (northern suburbs), have remained static and decreased in value. According to recent data released by REINT, the first quarter figures
indicate a dramatic fall in sales volume for houses in Sanderson LGA of 34.7% while Nightcliff LGA has also declined but by a smaller percentage at 3.4%. Inner Darwin CBD and Nightcliff LGA units and townhouses have followed in a similar fashion, having declined by 42% and 55.3% respectively.
The Australian Bureau of Statistics housing finance data reports that the number of home loans taken out by owner occupiers in the Northern Territory fell by 0.7% in March. We note that in contrast, other states have experienced a jump. The median house price for dwellings had decreased by 1.7% year on year to $553,000 while units have also move in the same direction and dropped by 0.91% according to CoreLogic RPData Daily Home Value Index year on year to 30 April 2015.
Conversely, the absorption rate of vacant land in the suburbs of Muirhead, Johnston, Zuccoli and Durack have seen continued growth with new housing developments performing strongly and being well received in the market. All in all, it is likely that newly built housing may continue to be on an upward trend whereas the established stock market will remain dampened.
The market for units in Darwin’s inner suburbs has remained relatively flat in the first half of 2015. This is largely due to the considerable amount of new stock coming onto the market in a short space of time with the completion of SOHO, Kube, The Avenue, Wharf 2, Kim on Smith and Catalina Apartments, which have added more than 800 new apartments to the market. At the same time, weak buyer activity and softening population growth has also put downward pressure on house prices in the Northern Territory. Falling house prices coupled with the recently announced rate cuts by the Reserve Bank Australia to a record low seem to be the right opportunity for first home buyers to dip their feet into the dull property market.
The combined influence of the changes in development phase of Ichthys INPEX project, the substantial supply of new units pouring into Darwin’s CBD market and the movement of Defence personnel has had an immediate impact on Darwin’s housing market with rental rates easing and the demand for existing older stock clawing back to show a clear easing in rental demand. Latest SQM Research data showed Darwin house rents dropped by 4.7% year on year to 31 March 2015 but still topped the highest rent yielding cities list at 5.7% for houses and 5.9% for units. Being one of the least affordable housing markets in the country, this drop in rent as a portion of median income spent is good news for tenants to get some much needed rental relief.
Looking at the year ahead, the downward trend is expected to continue through 2015 with a downturn in commodity prices and the winding down of the Northern Territory’s key economic driver, the Ichthys INPEX project. Shortage of affordable housing will remain a key issue for 2015 while increasing supply of smaller lot sizes in Darwin’s northern suburbs and Palmerston and record low interest rates will definitely provide a much needed boost to the housing market and potentially affect home ownership. In addition, the federal government 2015 / 2016 budget putting an emphasis on developing the Top End is certainly a broadly welcomed decision