Mighty Top End loses momentum
Boasting both high rental yields and strong capital growth in recent times, Darwin has been a godsend for many investors. But how will it fare in these tough days?
D arwin’s recent property market performance can only be described in two words: roller coaster.
At its peak, property values were growing faster than anywhere in the country. It even came close to matching Sydney’s lofty prices.
But then the resources boom ended. And new supply entered the market. As is the case with smaller markets, even a small imbalance in supply and demand can significantly impact the market.
“Darwin’s rampant price growth at its peak was always unsustainable, but, being a small market inundated with unprecedented high demand from inbound workers on Inpex and other projects, prices just kept going up,” explains Linda Phillips of Propell.
“The new supply, combined with a reversal in demand from resource projects, has seen demand evaporate.”
Phillips added that with up to 7% of stock currently on the market for sale, it is a buyers’ market, and properties are taking up to four months to sell, which indicates continuing price weakness.
“Were it not for interest rates forecast to fall in 2015 by another 0.25–0.75%, and for the lower Aussie dollar exchange rate, Propell would be forecasting price falls for 2015/16.
“The saving grace is that the lower exchange rate may rescue some of the resource projects, as well as increasing tourism employment, while lower interest rates will improve affordability.”
Phillips points out that while external forces are working against Darwin’s favour, its success is actually preventing further growth.
“It is the absolute level of prices that prevents more growth,” says Phillips. “The median house price is $564,500, the median unit price is $530,000. This is the third highest in the country after Sydney and Melbourne. Looking at historical trends, the median house price should be about $80,000 lower. The unit price is higher than Melbourne’s and second only to Sydney. Again, using historical trends, it should be about $125,000 lower.”
Fortunately for Darwin, the low level of unemployment, at 3.7%, is 0.3% lower than this time last year, and easily the lowest in the nation says Phillips.
“It is the continuing level of employment that is maintaining house prices,” she says.
The recent drop in the Aussie dollar should also provide some good news for both agribusiness and tourism – two sectors which also have pretty good longer-term potential in the Top End.
International and domestic visitors spent $1.85 billion in the NT for the year ending September, 2014. This represented a 13% increase in expenditure compared to the previous 12 months, which is the biggest spend by visitors to the territory in five years.
SUBURB TO WATCH
Millner: Popular part of Darwin shines on
Millner is one of the major growth areas of Darwin’s northern suburbs. Located between three main arterial roads and just 10km from the CBD, it is fast becoming a highly sought-after neighbourhood.
Sean Moloney, of Raine & Horne, says the suburb’s easy access is really pushing its popularity.
‘’It’s probably the location more than anything else. The whole area seems to be moving forwards. It’s growing really well,’’ he says.
With Darwin’s second largest shopping complex in the area coupled with good schooling, Millner is looking more attractive to families day by day.
“The area is getting more families moving there at this stage,” says Moloney.
“You’ve got the Homemaker centre close by, you’ve got Rapid Creek
Market quite close, and you’re only 10 minutes from the CBD.
“The schooling is really good. There’s a lot of schools in the area, along with good parks and recreational facilities. These are certainly sought-after amenities.’’
The airport, hospital, university and the foreshore are all well within walking distance, making Miller the ideal place for those wanting in-demand amenities at their fingertips.
Units in Millner also boast an excellent gross rental yield of 6%.
Moloney says the entire suburb has proved to be highly sought-after with no specific streets standing out as the most popular. He stressed that the central location played a significant part in this.
‘’People are drawn to the amenities and the location, having the markets really close as well. It has a great lifestyle and it’s so close to everything,’’ he says.