Price growth stagnates amid worsening affordability and Inpex project uncertainty
Darwin’s housing market has continued to cool, with another quarter of minimal growth. It seems the boom conditions of late 2009 and early 2010 have eased, with the median house price now resting at $514,000.
It’s a different story for units, however, which according to Residex experienced 4.14% growth in the quarter, to reach a median of $425,500. Twelve-month growth of 14% sat well above the annual average over the past decade of 11.65%.
Valuer with Colliers International in Darwin, Alex Maher, says the market is undoubtedly slowing in the northern capital. “There is certainly a slowing down of growth and, in some cases, actual decreases in values,” he says.
Hotspotting.com.au founder Terry Ryder agrees that the market is in decline. “In particular, there are concerns coming from a number of quarters that the apartment market is oversupplied, particularly the prestige apartments. People need to be a bit careful about diving into Darwin,” he says. “It would have been great to have bought there a couple of years ago, but if you buy now a lot of the growth has happened and you might be buying at the peak.”
This sentiment is echoed by Frank Peacocke, valuer and director of Herron Todd White Darwin. “Darwin’s property market has peaked for most classes of residential property, as Darwin is now considered to be unaffordable in most property sectors.” He explains that following six years of solid capital growth, the market escaped relatively unscathed during the economic turmoil over the last 12 to 18 months, but has since suffered as institutions tightened lending criteria and interest rate rises scared buyers out of the market.
Another dampener on investor optimism is a second delay for Inpex’s final decision on the Darwin-based LNG processing project Ichthys. “A lot of investors have dived into Darwin purely based on the expectation that the Inpex development is going ahead, but the Japanese company proposing it hasn’t actually formally decided to do it,” explains Ryder. “So there’s some uncertainty there; I’d just say be a bit careful.” Maher says that should the project go ahead, it will be a great boost for the local economy with significant knock-on effects for the property market.
Rental demand remains solid
Peacocke says that rental demand remains strong in Darwin, largely as a result of the defence sector and transient nature of the Darwin demographic. However, he says that further development of inner-city units and more land releases may lead to an oversupply of rental stock within the next 12 to 18 months, particularly if there isn’t any significant population growth to soak up supply and if the Inpex development is delayed further.
“Higher priced properties of $650-plus per week are taking longer to lease, with property managers now starting to reduce rents to levels less than they were 12 months ago,” he adds.
However, a recent report from EasyRoommate suggests that Darwin is now the country’s most expensive city for house-share tenants. The average monthly rent for a flatshare advertisement in Darwin was $779, compared to $603 in Sydney and $577 in Melbourne. Residex recorded rental rates of 5.38% for houses and 5.4% for units in July, with weekly rental amounts of $530 and $440 respectively.
Suburbs on the radar
Peacocke says that housing stock and vacant land will dictate demand for the remainder of 2010 and in coming years. “With the suburbs of Muirhead, Bellamack, Johnston, Mitchell, the Durack suburb extension, the proposed town of Weddell and other infill land subdivisions hitting the market over the next 3-5 years, there is a very high potential for an oversupply of land to emerge that could lead to a flattening or even a drop in values over the next 18 months, particularly if the planned Inpex gas plant development is stalled further,” he explains.
Maher says that Darwin itself has almost reached capacity in terms of vacant land, but new suburbs are being built north of Darwin (Lyons Estate) and south of Palmerston (Coolalinga). Peacocke adds that the pending approval of the highly publicised Coolalinga Mall, which will comprise a seven-storey commercial complex and residential development, will more than likely increase confidence in the area and boost the surrounding amenity.
Peacocke adds that the NT government’s $110m Tiger Brennan Drive upgrade will improve commute time from the outer metropolitan suburbs and Palmerston into Darwin. “We predict that these infrastructure upgrades will have a direct positive effect on land prices within the rural residential areas such as Humpty Doo, Howard Springs, Virginia, Herbert and Girraween,” he says.
“We see the continued growth from previous years continuing as many Territorians seek the quieter surrounds away from the city and suburbia.”