Things aren’t looking good in the Top End. With dwelling prices continuing to fall, the pain is expected to persist over the next two years
If people in Darwin wonder what life will be like after the Inpex gas pipeline is constructed, they can take a look at WA and Queensland, where the downturn in resource project construction has already had its impact,” says Linda Phillips, senior economist at Propell Ltd.
“Inpex is halfway through a five-year construction phase and is one of the major employers in Darwin, with 8,000 workers. This fuelled a massive increase in house and apartment prices, as the small market sought to cater for a massive influx of workers. But the continuing addition of new developments and land for housing is now having an impact, with prices easing.”
Darwin prices increased dramatically during the mining boom, as a shortage of stock and a large inflow of workers increased demand. However, those years have passed and prices are declining as supply now exceeds demand.
The downturn in exports has affected activity at the port, although this is being offset by increases in the live export trade in cattle and buffalo to the Asian market. Darwin also has the potential for an increase in tourism, driven by the lower A$, and could benefit from the government’s initiative to expand activity and population growth in north Australia.
But these things will take time. In the medium term, there is the potential for a gap in demand in the housing market, as the resource industry cuts jobs long before other sources of employment grow.
“Investors looking to buy now face having to select property well, rather than markets, and it may be circumspect to wait a couple of years before seeking exposure to this market,” says Phillips.
“They need to be prepared for prices that are not far behind Sydney prices, and to head for the better prestige and coastal suburbs, which seem to be holding levels of value from last year, with continuing good demand reported by agents.”
According to Brock Shearn, residential manager QLD/NT, Propell Ltd, the prestige and coastal suburbs of Darwin such as Larrakeyah, Fannie Bay, Parap and Nightcliff will always attract good demand from owner-occupiers and investors.
“Suburbs surrounding those areas such as Rapid Creek and Millner still offer some value for money, with the potential for reasonable capital growth. The better suburbs around Sandy Bay are likely to see values holding in the next year, while the southern suburbs such as Palmerston will see prices easing.”
At their peak, median prices in Darwin rivalled those of Sydney, a situation that was unsustainable in the long run. As a result, prices have been easing in the house market, and are weaker for apartments.
This is exacerbated by the growing number of new apartment developments throughout the Darwin CBD. About 800 units have come onto the market this year. The increasing supply of land in Muirhead and the Palmerston region is also adversely affecting vacancy rates and rental values.
Many apartments have been let on long-term contracts related to the gas industry, which is helping to underpin returns, but there has been a general contraction in rental growth within the past six months.
SUBURB TO WATCH
Wulagi: Beautiful suburb that’s close to everything
It would be hard for families to find a better place to live than Wulagi. For instance, there are an abundance of lovely parks and leafy green streets, plus it’s also near Casuarina Beach, Darwin Airport and Charles Darwin University. Then there’s its close proximity to the largest shopping centre in the NT – Casuarina Square.
Wulagi is also less than 14km (about 15 minutes) from the Darwin CBD, and the strong local economy is exemplified by the high median weekly household income of $2,055, according to the most recent ABS stats.
Additionally, in the 2015/16 NT Budget $2.1m has been allocated for a refurbishment of Wulagi Primary School.
Strong demand for this suburb is shown by the auction clearance rate of 100%, according to DSRdata.com.au. And another statistic worth noting is the healthy 5.1% per annum average rental yield, according to OnTheHouse.com.au.
There are a number of quiet streets right near Wulagi Primary School, including Robin Court, Wren Court, Pitta Court, Thrush Court and Finch Court. Three-bedroom houses with swimming pools can be picked up for less than $530,000. Moreover, there are many sturdy houses on big blocks of land in this area which are built to outlast natural disasters such as cyclones.
