The month in review: Darwin
By Herron Todd White
The Darwin and Palmerston residential housing market in 2015 can be characterised by the impact of the changes to the First Home Owner’s Grant and government incentives offered to purchase off the plan units or build brand new homes. When looking at how this has impacted each sector of the market none is more notable than the inner and fringe existing CBD unit market. This segment of the market has noticeably softened as there are no incentives to purchase existing stock and purchasing off the plan units is more appealing to buyers. We are noticing stagnation in settled sales occurring for 2- and 3-bedroom units in the inner CBD, fringe CBD and northern suburbs. With many units now listed on the market for extended periods, the market has become saturated with older unit stock and consumers are now aware that it is a buyer’s market, forcing vendors to become more realistic in their price points if wanting to sell. Properties purchased in this category during the peak period between 2013 and 2014 have likely decreased in capital value, with the latest RELM figures indicating that the inner city unit median price had reduced 4.1% over the last quarter to $543,355.
Evidence from the market includes a recent inner city unit in Larrakeyah that was purchased in 2013 during the peak period of the market at the low $400,000 point and has recently re-sold at the high $300,000 mark. Unfortunately this is not an uncommon event with many agents now encouraging vendors to be realistic about their expectations of what their property will achieve if sold in today’s market. The same trend line for market value is being seen in the rental market. Rents have softened along with capital growth. Recent RELM figures show a 5.6% reduction in median unit rental prices in the last quarter for 2-bedroom inner city units. A recent conversation with an agent summed up the current inner city unit market well when the agent noted, “you are better to lose $5,000 over the course of the year in income growth than lose $30,000 in capital growth”.
The prestige market has not suffered to the extent of other segments of the market. Although not firing on all cylinders, the prestige market is victim to a case of circumstances with investor confidence down as income growth has decreased since the start of 2015. There are only a limited number of purchasers who operate in this market with properties being listed for long periods of time. However, a casual $1.5 million still buys you a 4-bedroom waterfront property. Although this seems exorbitant to the average consumer, when put into perspective, there are limited markets in Australia that still offer the same opportunity to purchase prime waterfront real estate at this price point.
The market for existing dwellings in the northern suburbs and Palmerston has fared better than the unit market, however it has not escaped a price reduction, with median house prices down 1.3% and 4.4% respectively in the last quarter (REINT). If you are looking to sell your property in the northern suburbs or Palmerston you are now in competition with a $26,000 grant and stamp duty concession to build new. As expected, many first home owners are now taking up the available government incentives and looking to purchase house and land packages. A prime example is the heightened activity at the release of Zuccoli Aspire, where home owners can now purchase a 301 square metre block starting at $105,000.
The silver lining to the current market conditions is that it is now more affordable for market participants looking to enter the market and also for tenants extending an existing lease or looking for a new rental property. This has a flow on effect to other sections of the local economy, making Darwin a more attractive place to work and live.