Darwin November 2017

The month in review: Darwin

By Herron Todd White
November 2017

The rental roundabout – a term so often thrown around when trying to persuade people living in the rental space to commit to purchasing a new home or unit or something to call their own. The Darwin market has seen some dramatic changes in the capital value space over the past 18 to 24 months, we now consider it an opportune time to discuss the rental side of the market and what’s happening.

Darwin has long been a ‘renter’s’ city, transient population, a distinct high and low season and a relatively young population has resulted in a high proportion of the population renting property vs. buying property. The Defence Force, Public Servants and in more recent times, the oil and gas industry have been a steady supply of the rental market. In the early stages of the Ichthys project (2011-12) an influx of construction workers had a spike effect on rental values and vacancy rates sat below 3%, at the time, a signed residential lease was as valuable as a ticket to Willy Wonka’s Chocolate Factory. With significant supply of new housing, namely CBD units and vacant land in Palmerston, the pendulum of supply has well and truly swung, tenants have many options, rental values have decreased and vacancy rates have increased. The latest REINT data shows that the greater Darwin vacancy rate is sitting at 5.9% (Sept 2017) compared to a stressed 3.1% in December 2012.

Defence remains a very large pillar of the housing market in Darwin, with over 10,000 personnel in the Territory, it’s not only DHA supplied accommodation, many private residences are also leased and occupied.

Opportunities within the rental market are very much linked to population growth, further expansion of CDU as an International University will require student lodgings, Defence opportunities both the ADF and US Marines will require housing for families and single personnel, and the obvious Mining related ventures – dare I mention Fracking also have the potential to increase the demand for rental properties.

Median rental values have well and truly softened on the back of the new supply mentioned above, as at September 2017 the median weekly rental for a 3-bedroom dwelling is $466 per week, compared to $638 per week in December 2012. The weekly rental for a median 2-bedroom unit is $366 per week, compared to $472 in December 2012. This represents a 27% discount for a 3-bedroom house and 22% for a 2-bedroom unit, strongly highlighting how the current market is heavily in favour of tenants.

The big unknown to the rental market is what will be the impact from the wind down of the Ichthys Construction phase.

Will these tenants leave Darwin? Will they stay locally and shift into different careers? Quite obviously, if we have a large exodus of people from Darwin it will increase the supply of rental properties and have a further weakening affect on rental values. If other projects are started or new industry rises, then we will see a stabilising affect on the market and rents will remain firm.

Tenants naturally gravitate to better quality dwellings and units, with a good level of amenity, therefore it remains at the feet of the landlord to provide good quality accommodation that is safe, clean and at an appropriate price. With rents at the lowest levels they have been in five years, we may see more tenants staying on the rental roundabout for a few more laps yet.