Momentum continues – for now
Housing construction and prices continue to boom in the NT, but what comes next?
Growth in the NT continues to accelerate, ensuring there is no “construction cliff ” in the foreseeable future, the latest Deloitte Access Economics Business Outlook reports. With mining-related construction still strong and housing construction lifting, it predicts construction is not likely to slow notably until 2015–16.
While the NT may have been late to the global resources development party, it is now its life, with population growth above the national average, improved wages, and boosted housing prices, rents and construction, Deloitte partner Chris Richardson says. “After all, add a big project or two atop a small economy, and it is no surprise when some fireworks follow.”
Business investment spending as a share of the NT’s economy has just tripled, and the flow of project work suggests it will stay robust for some time longer, Richardson says. “Yet look either left or right – at Western Australia or Queensland – to be reminded that such surges in growth led by project construction are likely to be temporary.”
Relative to the size of its economy, the value of engineering construction work in the NT is larger than that in Queensland and WA, he continues. “But all the heavy lifting is being done by a single project – the $34bn Ichthys LNG development. The value of that project by itself is almost twice the size of the state’s domestic economy.”
This means the construction sector will be bound to the fortunes of the Ichthys project for some time as it is not due to be completed until 2016, Richardson says. “While the NT looks likely to have several years of good growth ahead, construction work will peak, perhaps in 2015, and cycle back thereafter. Just how far the NT’s project construction cycle then falls back will depend on whether Australia’s resources sector has succeeded in its current phase of cost control.”
Market favourable for investors
Meanwhile, Colliers International research analyst Lianna Georges says the property market will continue to play a key role in the NT’s economy. The expansion of industries such as defence, tourism and agriculture alongside mining will attract further investment, and new residential development will be necessary to house the growing population, she says. “This development will rely on the NT government implementing efficient planning systems which allow for the affordable construction of new homes.”
Darwin should remain a firm favourite among investors, due to its high returns and positive economic outlook, she says. However, while investment sales are expected to remain strong, there could be a drop-off in first home buyers. “Agents noted a decrease in enquiry from younger buyers who generally look to spend under $500,000, and with minimal properties available in this category sales have been subdued. Price constraints among first home buyers may see demand strengthen for units and townhouses.”
Suburb to watch
Proximity to Darwin’s CBD, as well as the Parap markets and Darwin Turf Club, makes the quiet inner-city suburb of Ludmilla particularly appealing, according to Kerri-Ann Laurence from Real Estate Central.
The suburb’s selling point is “location, location, location”, she continues. “I tout it as being ‘the new Fannie Bay’, as it is the next suburb on, but not as expensive. It is so affordable compared to surrounding suburbs like Parap and Fannie Bay – the median house price in those areas is around $1m.”
Full of older-style homes, there is a very tropical quality to the suburb, Laurence (who lives in Ludmilla) says. “There are lots of elevated homes with louvres and established gardens. The typical block size is around 1,000sqm, whereas in the northern suburbs it is 800sqm, and smaller again in the new suburbs.”
There are few apartments, apart from the Calma Gardens complex that comprises about 60 ground-level villas all with their own small yards, she adds.
Ludmilla is near the bus routes, and a short stroll from the Parap village shops and a bustling weekend market. It is primarily residential with no industry or large businesses.
With huge confidence in Darwin at the moment, there will be growth across the board, Laurence says. “Ludmilla offers a good range of property … You can buy a basic ground-level three-bedroom house for around $500,000 or a large renovated, elevated home with a nice pool and balcony for around $1m.”
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