Darwin has yet again kept the doubters guessing as to when its reign as best-performing capital city will come to an end.
Skeptics can keep guessing as the latest data from Residex shows Darwin’s median price growth shows no sign of slowing.
During the three months to January 2010, median house values jumped by another 3.14% to $505,500 after gaining 4.83% in the December quarter. While many would argue that this growth is smaller than Melbourne’s 4.02% or even lower than Brisbane’s impressive 3.51% gain, this is by no means a small achievement considering Darwin has been rising since 2004.
The latest figures from RP Data-Rismark Hedonic Home Value Index for January is even more upbeat, with Darwin continuing to outperform all other capitals. In addition, Darwin is providing the highest rental yields, with gross rental yield of 5.7% for houses and 5.9% for units.
Economy surges ahead
The Access Economics December Quarter 2009 Business Outlook has revised growth forecast for the NT upwards from 1.7% to 4.8% in 2010/11 – the highest growth of the jurisdictions.
The large revisions primarily reflect a change in sentiment towards private construction investment performance over the next few years, a significant driver of economic activity in the Territory.
“Like WA, the value of definite projects in the Northern Territory is now also on the rise, and there is plenty of potential for a more significant expansion to take effect over the next couple of years,” states the Access Economics-Arup Investment Monitor.
Current projects are led by Darwin Clean Fuels’ $540m processing facility along with the $110m extension of Tiger Brennan Drive, the report says.
Elsewhere, the Investment Monitor notes that Arafura Resources is planning to spend some $1.1bn on the Nolans Bore rare earth project north of Alice Springs.
But the glittering prize for the Territory economy is the potential spend associated with the Inpex LNG project, but there are a number of other resource-related projects in the offing, and public sector spending will also be on the rise.
Although a decision on the massive $30bn Inpex project has again been delayed to late 2010/early 2011, it is expected to be a major factor in local business confidence and business expansion. “The Inpex project, if it proceeds, will bring to Darwin a construction workforce which will have a major impact on a city with relatively small numbers,” says Mick Smith, residential marketing specialist, Raine & Horne Darwin.
To some extent, the ‘ifs’ and ‘maybes’ are yet to rub off on the residential property market. Chris Deutrom, NT director for residential property at Colliers International, says it’s largely business as usual in the top end, and if anything he’s witnessing more buyers return to the market – especially in the higher end of the CBD market. “Late last year that had been lagging, particularly high-end apartments, but we’ve had a few sales recently that indicate there may be a bit more movement this year,” he says.
Despite expectations of the bubble bursting, Deutrom believes this is unlikely to happen in the short to mid-term. “There’s a simple realisation that there’s no new supply coming on and people are now thinking, ‘ok, we’ve waited, we’ve looked, most developers are holding firm on their price, so we probably won’t get a better deal than we’ll get now’,” he says.
An all too rare land release in January saw local agents shifting 49 blocks of land in the Johnston area in two hours, indicating demand is still far outstripping supply. However, as Deutrom notes, there’s a significant difference between land and established homes. On that front, a slight cooling off might be occurring, particularly in the Palmerston area. “There’s some belief that the Palmerston market is starting to plateau now,” he says. “We’re holding a reasonable amount of stock in established homes in Palmerston which we weren’t doing late last year because the market was so hot. Prices haven’t come off yet but we’re finding stock is available for longer.”
Current market prices are preventing first homebuyers from entering the market and it’s also becoming increasingly difficult to find centrally located houses for under $500,000. According to RP Data, no suburbs within 5km of the CBD have a median price below $500,000. These suburbs, with water frontage and proximity to amenities, remain highly desirable.
The situation improves further from the CBD. Within a 10km radius there are six suburbs with a median price below $500,000; and within a 20km radius there are 23 suburbs.
Deutrom recommends investors note the plethora of unit development applications for two-bedroom apartments in the inner city – a natural reaction from developers to the seeming oversupply of high-end units. Existing developments in this space are selling well, Deutrom says.
For houses, he is an advocate of Tiwi, Rapid Creek and Millner.
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