Good times keep rolling
While news about – and future predictions for – Darwin continue to be dominated by the positive, one report suggests there could be an economic slowdown in the future
Thanks to its resources-driven economy, the tropical city of Darwin is going from strength to strength.
Much the same can be said of its property market, which is proving to be a top earner for investors. According to the April RP Data-Rismark Home Value Index results, Darwin was the best-performing capital city. Over the three months to April 2014, it recorded a 5.1% increase in dwelling values.
The RP Data results show that once again Darwin properties attracted the highest rental yields of any capital city. Houses recorded rental yields of 5.8%, while units recorded yields of 6.1%.
Real Estate Institute of NT CEO Quentin Kilian says that over the last 10 years Darwin has outperformed every capital city in rental yields. This is because high demands for rental properties and limited stock have led to high rental prices and strong returns. Given the city’s growing population and the current state of the NT’s economy, this seems unlikely to change soon.
The latest CommSec State of the States report shows that the NT is Australia’s second best-performing economy, just behind WA. In fact, it is ranked as the strongest on four economic fronts: economic growth, business investment, unemployment and construction work.
Further, the NT leads the rankings on economic activity and maintains the fastest annual economic growth in the country (up 11.5% on last year). The report says the economic momentum derives from commercial and engineering construction but is being held in check by the housing sector’s weak growth.
Amidst all the good news, one report does sound a note of caution. The latest Deloitte Access Economics Investment Monitor points out that work on many of the NT’s major projects is due for completion over the next year. Even the massive Ichthys LNG project is set to wrap up in 2016.
With activity in the non-residential construction sector modest and not much in the pipeline, a $300m mixed development planned for Palmerston is currently the leading light, the report adds.
Investors reign in Darwin market
According to the latest Herron Todd White report, Darwin’s market might be good for seasoned investors but is proving problematic for the first home owners.
Not surprisingly, affordability is the key issue. With Darwin being one of the highest-priced property markets in the country, first home owners are simply being priced out of the market. Meanwhile, continued low interest rates and the strong rental market are drawing in investors.
The report states that investors have been particularly active in the inner Darwin market. Up to 70% of some of the CBD developments underway have been sold off the plan to investors.
Suburb to watch
Private and secluded, Brinkin is a residential area on Darwin’s northern beachside. While it is 11km from the CBD, it is home to the Casuarina campus of Charles Darwin University, and the Royal Darwin hospital is nearby.
As a result, the suburb is highly sought after by academic and medical professionals, says Nick Mousellis from Ray White Darwin. “This means it is a tightly held market with an air of exclusivity about it. But it also means it has a solid and reliable rental market.”
Originally developed in the mid-1980s, Brinkin is dominated by the university. However, it is also just a couple of minutes from Casuarina beach and boasts a coastal reserve, part of the Rapid Creek
wetlands and a range of walking trails and bike paths.
This all adds to the suburb’s desirability, Mousellis says – “as does the fact that, while there are some major shopping centres nearby, they are not in the suburb itself, so it is peaceful and private with good lifestyle options”.
A typical Brinkin property is a substantial residential dwelling, and blocks of 1,000sqm are not uncommon. Properties like these, particularly those on the beach or cliffs, command high prices. At the same time, the latest RP Data figures show the median unit price in the suburb is $410,000.
University recently announced it is building a campus for a medical centre in the area, Mousellis adds. “The community considers this to be great news and further capital growth is expected.”