Darwin comes off the boil
It may have been a sweltering summer in Australia’s northern most capital, but appreciation in property values appears to be cooling
The Darwin property market looks set to be cooling down over 2014, as the rate of price increases slows and more housing stock gets released onto the market.
This is according to research and advisory company SQM Research, whose managing director Louis Christopher points out that the upward momentum in Darwin house and unit prices has started to change.
“We think the Darwin market boom, which really had its heyday throughout the course of 2012, has been slowing [through] 2013,” he says. “Our prediction for Darwin in 2014 is that while we may see some capital growth, it is going to be at a far slower rate.”
One of the primary reasons for the slowdown is that investor interest has been waning, Christopher says, and this is having a big impact considering that the 2012 boom in house prices was driven primarily by investors. The owner occupier segment of the buying market, in contrast, had largely remained dormant.
Another, albeit more critical, driver of the softening market is the level of properties on the market. It has been no secret that Darwin property prices have surged over the last 18 months and this has brought a lot of optimistic sellers into the market and encouraged new housing developments.
A look at DSR Score numbers (DSRscore.com.au) reveals just how pronounced this change in stock levels has been. In December 2012, DSR Score reported that 337 properties were listed for sale within the Darwin metropolitan market. By December 2013, that number was 1,691. This represents a 400% increase in the amount of properties up for sale in the space of a year.
For commentators such as Redwerks research director Jeremy Sheppard, inventor of the DSR Score, such an outcome is hardly surprising. “Prices change according to changes in supply and demand,” Sheppard says. “Many people will consider the start of new [housing] developments or the opening of new estates as a positive for the property market… more often than not, these events will actually represent a stifling of capital growth.”
Sheppard says that even in conditions where demand remains good, an excess level of supply will put something of a buffer on property price increases. This certainly helps to explain the already slowing growth of Darwin’s median house price and why it looks forecast to continue losing steam. RP Data figures indicate that Darwin’s median house price grew by just shy of 13% between January 2012 and January 2013. Between December 2012 and December 2013 the growth rate slowed to just 4.7%.
Suburb to watch
A suburb of Palmerston, Durack sits on the Darwin satellite city’s northern reaches and enjoys excellent connections to the Stuart Highway. This puts the Darwin CBD within 22km of the suburb.
Recent activity has put the market in a strong position to see further price increases. Already prices have edged up 8% since December 2012, but the latest auction clearance rate (100%), suggests that Durack houses remain a popular choice for Darwin investors and homebuyers alike.
It’s not hard to see why. Durack’s location puts it close to golf courses, childcare facilities and schools, as well as Marlow Lagoon – a popular water park. There is also a modest selection of local shops.
Owing to these attributes, the area appeals predominately to families with small children, who tend to gravitate towards affordable houses on big blocks. There is also a student component to the local resident base, largely because of a Charles Darwin University campus within the suburb.
Considering the large-scale growth in Darwin property prices as a whole, the fact that Durack houses attract an average rental yield of 6% is an indication of the investment opportunity up for grabs. Whenever prices increase, yields tend to go down, but a solid 6% rental yield suggests that there are plenty of properties offering the prospect of positive gearing – something that is becoming increasingly harder to find within Darwin of late.
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