Darwin

The Smartline Report – September Edition

The month in review: Darwin

By Herron Todd White
September 2015

The Darwin residential unit market has been a talking point for some years now. Demands from investors and owner occupiers have brought about the construction of over 1,000 new apartments in the Darwin CBD and inner suburbs since the start of 2013, headlined by Stage 2 at the Darwin Waterfront, Catalina, City Central, Catalyst and Kim on Smith at the Daly Street end of the CBD, Kube opposite the Darwin GPO, Zen Quarter on Carey Street and a number of boutique buildings on inner streets of the CBD, Larrakeyah, Stuart Park and Parap.

These existing first home owner and previous grants to all purchasers of new stock have added depth to the market over recent times. Different sections of the market have been catered for with the recent construction boom, ranging from 1-bedroom studio apartments under $350,000 through to 3-bedroom units over $1 million.

On the flip side of the demand for the new stock, the second speed of the market has shown a significant softening for existing units. Given that the incentives for new stock are in many cases up to 5% of the purchase price there is limited interest in existing units that sit in similar price ranges. It is also a sign that there are older buildings which are less attractive to investors due to less depreciation on the improvements, higher maintenance costs, lower rental rates and an overall lower return on investment.

It is not just the Darwin CBD that is experiencing a high level of construction. In the northern suburbs Nightcliff, Millner, Coconut Grove and Berrimah have a number of new unit developments currently under construction. Looking to Palmerston there is a mix of unit development in all of the new suburbs. These include medium density (four storeys) through to large complexes with ground level and two storey semi detached type dwellings. Again these developments are being driven by incentives to first home owners and a considerable amount of investment by the Northern Territory Government under the Real Housing for Growth program. This sees private investors providing housing options which are subsidised by 30% of the market rental by the NTG to offer more affordable housing options for means tested Territorians.

The most recent data as produced by the REINT highlights that the overall Darwin median unit price is $480,000 which remains quite stable only falling 1% year on year to June 2015. The big shift in the unit market has been seen in the rental market. For the year to June 2015 in the inner Darwin sector, 1-bedroom units have reduced 9.5%, 2-bedroom units have reduced 12.5% and 3-bedroom units have reduced 16.5%. This has certainly been a welcome relief to all tenants in the market, swinging the pendulum back to the tenant after a number of years in the landlord’s corner.

Where to for the residential market? Activity on development sites across the greater Darwin area remains quite steady. This suggests that further development is in the pipeline. As with most sectors of the market the test will be how existing stock is absorbed following the completion of the Inpex construction phase. However we do note that a large proportion of the workers are located in workers camps, such as at Howard Springs which is occupied by over 1,500 workers.

With the continuance of very healthy incentives available for new stock we would expect that the demand for off the plan units will continue, albeit at lower levels to the peaks seen in 2012 and 2013. The existing unit market is very largely dependent on the next move from the NT Government. It is widely considered that a reinstatement of FHOGs on existing property, particularly entry level units, will help boost this section of the market through late 2015 and into 2016.

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Please note that information in this publication is subject to change without notice. Smartline assumes no responsibility for any errors, omissions or mistakes in this document. © Smartline Home Loans P/L 1999 – 2015. Australian Credit Licence Number 385325

 

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