NT Excerpt from the 2011 September Market report

The investor’s darling is all dressed up with nowhere to go 

A year ago, this column suggested that the Darwin market was ‘in limbo’ due to the delay of a formal decision on the gargantuan Inpex project. Twelve months later, we’re still waiting for a decision – and the market’s still running in neutral.

RP Data’s figures for the April quarter paint a sluggish picture: Overall values were down 0.2% over the quarter, and 0.7% over the year. With Darwin’s unit market largely restricted to prestige apartments, the units in particular have suffered, seeing a 3.6% fall in values over the year – whereas houses have seen a marginal price rise of 0.2%. Yields are also down from the highs of a few years ago, with average house rental yield at 5.6% and units at 5.7%.

That doesn’t mean that Darwin’s a no-go area for investors, although Cameron Kusher, senior analyst at RP Data, argues that investors should perhaps scale back their expectations.

“We’re certainly seeing a slowdown in Darwin,” he says. “It’s been on a run for the last 10 years, and we’re starting to see a pullback. I remember when yields were 6.5%, but 5.6–5.7% is still attractive. Prices are a little restrictive at the moment, though.”

Kusher’s referring to Darwin’s lack of affordability – indeed, its average property value is higher than Brisbane, Adelaide and Hobart, and nudging that of Perth. With little land release on the horizon, that doesn’t seem to be likely to change in the immediate future.

In fact, the most likely outcome for Darwin is that it’ll continue along in a stagnant pattern, until some external jolt – like a $12bn offshore natural gas project – kickstarts the local economy.

“Inpex!” exclaims Herron Todd White’s latest Month in Review. “This project will employ more than 2,000 people in the building phase and another 300 ongoing,” says the report. There is no question that if the decision is affirmative for Darwin in the fourth quarter of this year, we are likely to see renewed confidence in the residential housing market in Darwin and Palmerston.

The report argues that workers will come from interstate to support the project, the confidence within the property market will increase – leading to decreases in vacancy rates and a return to the market for many subdued buyers.

So, it seems as though Darwin is on tenterhooks, waiting for the final decision on the project (due November). Until then, it’s treading water.

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