Can the Northern Territory’s wild card continue its decade-long winning streak?
Property analysts have been forecasting the end to Darwin
’s property boom for years – but it’s continued to confound all expectations. RP Data figures show that median prices, fuelled by land constraints, have been increasing by an average of 15% every year since 2001 – meaning a property that was $250,000 10 years ago is now worth over $1m.
Investors who got in while the going was good have been laughing all the way to the bank. Now that median house values are well over $520,000 – on par with Canberra, and rapidly catching up with Sydney – surely growth is about to stall?
RP Data research director Tim Lawless suggests that it’s already happening. Capital growth “hit the brakes” in the latter half of 2010, and he thinks that the city has simply reached a tipping point in terms of affordability.
“I think this stage of the growth cycle has come to an end,” he says. “Land supply is at a minimum, which means that more properties are unlikely to be built in sufficient numbers to release the prices. However, prices have simply reached a critical point where they’re increasingly unaffordable – causing the market to stall.
While price corrections are unlikely – values are likely to be underpinned by the sheer scarcity of land, especially in the CBD – growth on the scale of the last decade is equally unlikely over the course of the next year. However, the other part of Darwin’s attraction for investors – its high rents – are unlikely to fall either.
“There’s a chronic shortage of accommodation in Darwin,” says APM’s Andrew Wilson. “People have got to live somewhere, and there’s a lot of pressure on rents. Darwin actually has the highest house rents of any of the capitals in Australia, and its unit rentals are only just short of Sydney.”
It looks like investors seeking yields are still in luck – if you’re not put off by the eye-watering entry costs. The likelihood of capital growth hasn’t been blown completely out of the water: you may just have to look a little further down the road.
“We’re still seeing strong growth in Palmerston,” explains Power Property Partners’ chief property consultant, John Lindeman. “It’s experiencing the flow-on effect from Darwin becoming too expensive – in a similar way to Queanbeyan seeing substantial capital growth due to buyers being priced out of Canberra.”
Lindeman points out that Palmerston suburbs have shown massive growth in the last year – some as high as 25%. Darwin’s average capital growth was half that.
Even so, Lawless urges caution when looking at Darwin’s satellite town. “There’s definitely demand in Palmerston, at least partly because it’s still developing,” he says. “But if I were buying into the Northern Territory, I’d stick close to Darwin proper – ideally the central, seaside suburbs.”
Lawless’ reasoning comes down to security – especially because the Territory government is likely to be releasing more land for developers to ease housing pressures.
“If new land supply appears, there’s uncertainty about how it could affect prices in Palmerston,” he adds. “Growth in the city may not reach the heights it has over the last few years, but land will remain scarce and employment is more certain – giving investors more security against price falls.” t anyone after short-term capital gains.”
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