’s strong gains are finally showing signs of slowing down
Darwin’s median house price fell by 0.43% to $503,000 over the three months to March after adding just 0.83% in the previous quarter. In the month of March alone, prices rose by just 0.30% taking the year on year growth down to 10.97% – lower than the average annual growth of 11.11% over the past 10 years.
Units fared better, with the median price rising by 4.8% to $412,000 over the past three months. However, this is still lower than the 6.72% gains achieved in the February quarter.
“Darwin has become expensive, so be very selective if you want to invest in that market,” says John Edwards, CEO of Residex.
Louis Christopher, managing director with SQM Research, is equally cautious about investing in Darwin at the moment. “Darwin is the city I’m most cautious of,” he says. “I’m really concerned about what’s going on in that market. It’s due to correct; it should be correcting, but it’s not because of the first homebuyer grant boost effect.
“It is definitely what I classify as a property bubble,” Christopher continues. “I’m very cautious about the short to medium term correction there – I think it’s very susceptible to any further interest rate rises. Over the long term, there are good opportunities but in the short term it’s looking dangerous for investors.”
Angie Zigomanis, senior research analyst with BIS Shrapnel, is less pessimistic about Darwin’s prospects.
“It’s a difficult market to pick because it’s such a small market, and small things can have a big impact there,” Zigomanis explains. “House price have been pretty strong. While the coal and iron sectors were hit pretty hard last year, during the GFC, the oil and gas sectors were doing a lot better in the Darwin market. I think we will continue to see moderate growth there, mid to high single digits over the next 12 months.”
So, has the market peaked?
“In terms of the rate of growth, it probably has peaked, but in terms of the actual level I don’t think we can necessarily say that it has and it will go backwards,” says Zigomanis. “It will continue to tick over at this high level over the next two years.”
Quentin Kilian, CEO of The Real Estate Institute of Northern Territory, says he does not foresee a downturn, “though our market has typically grown and stabilised”. Rather, he predicts pricing will continue to rise – albeit at a slower rate for the rest of 2010 – with a likely period of static growth late in the year and heading into 2011.
And the demand for land in NT remains very strong. “We are continually pushing the government to be more aggressive with their land release programs. While they are carrying out some land releases, it is certainly, we feel, not enough to get ahead of the situation of chronic land shortage,” Kilian says.
Engineering projects look set to start soon
The Access Economics Business Outlook report says that given housing activity in the NT has lagged underlying demand for some time now – and given that the Top End will receive a solid share of new housing being built with the national stimulus fund – “that combination of factors points to the potential for some further growth gains in the next year or two in the pace of housing activity, even with the mortgage interest rate on the rise”, it says.
At the moment, Access Economics says homes are currently pinned on Inpex Alpha’s mighty $30bn Ichthys gas project, the plans for which include the construction of an LNG facility at Darwin.
“A final investment decision has not been taken, though recent global developments and the message from commodity markets suggest developments may be moving its way,” the report says. “Projects under construction include upgrades to the East Arm Port, including the construction of a condensate procession facility, while the NT government is extending Tiger Brennan Drive through Palmerston to the Stuart Highway at the cost of $110m. Aside from the gigantic Inpex projects, other works in planning include Crux Liquids’ project in the Timor Sea, due to get underway this year.”
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