Weak on all fronts
Darwin is dealing with another blow as rents lose ground amid falling prices
Landlords in Darwin may still be racking up decent yields, but this may soon come to an end, based on the recent rental report by Domain. During the past 12 months, median rents for houses and units plunged dramatically, losing 10.6% and 12.7% respectively.
“They are now at the lowest levels the city has seen since June 2012,” says Andrew Wilson, senior economist at Domain. “Just like Perth
, the rental market is suffering due to falling interstate migration. As we’ve seen in Perth, there has been a significant decrease in the cost of both house and unit rents. The weakening activity from fly-in, fly-out workers, which previously created high demand, has resulted in higher vacancy rates with no end in sight.”
The decline in rents comes as prices continue to lose ground. During September, prices fell by 0.9%, according to CoreLogic RP Data. Over the year, median prices fell by 3.9%, the biggest drop across all other capital cities.
According to Cameron Kusher, senior research analyst at CoreLogic RP Data, house values fell 3.1% over the past year. Unit values suffered an even bigger loss, with a 7.4% drop over the same period. During the three months ending September, values plunged by a massive 13.3%.
“Darwin’s housing market is well into a correction,” he says. “Weekly rents are also moving lower. Despite the sharp fall in weekly rents, Darwin’s gross rental yields are still the highest of any capital city for detached houses, at 5.5%, and equal highest with Hobart for units, at 5.5%.”
Like Perth, Darwin has been affected by the downturn in resource sector employment, according to Linda Phillips, head of research at Propell.
“Darwin is a small, specialised market and subject to greater volatility in prices,” she says. “The Inpex project is halfway through its five-year construction phase and currently is one of the major employers, with 8,000 workers. When these employees were recruited, the influx of workers into the market created a massive increase in home prices. But with the addition of new housing developments and the release of new land, supply is catching up with demand and prices are easing.”
Phillips notes that the outlook for LNG exports is still volatile and will continue to weigh on the market. “It is very much tied to the outlook for the Chinese economy, which is subject to considerable uncertainties at present. In the medium term, there is a gap between supply and demand in the housing market and it is likely to take several years before the market finds a new equilibrium level.”
Despite this gloomy outlook, Wilson is more upbeat about Darwin’s prospects compared to Perth.
“Darwin’s prospects are more positive,” he says. “I think it has better upside potential compared to Perth. The economy is still performing well. There are also other economic drivers such as agriculture and tourism, in addition to the Inpex LNG project.”
SUBURB TO WATCH
Nightcliff: Affordable unit offering
In a city where affordability is a debilitating constraint, Nightcliff stands outs as a bright spot. Despite its proximity to Darwin, just 8km away, the suburb is still within reach for many aspiring buyers. While houses are now fetching a median price of $790,000, units are remarkably affordable at about half the price ($356,000 median value).
Rental yields are attractive at 5.9%, thanks to high demand from renters. According to the latest ABS data, half (50%) of all the dwellings in Nightcliff are currently rented.
The suburb enjoys close proximity to the beaches and major shopping districts. It offers a laid-back lifestyle compared to Darwin’s inner-city apartments.
These desirable features continue to lure people to the suburb. According to the ABS, the population grew by 8% to 3,651 between 2006 and 2011, and is dominated by younger and more affluent residents.
One of the city’s northern seaside suburbs, Nightcliff has good schools, convenient transport links to the Darwin CBD, and is 2km from Darwin International Airport.
Darwin is desperately short of affordable units, with only 1.41% of all dwellings currently listed for sale.
Most in-demand streets are Casuarina Drive, thanks to its amazing views, Mimosa Street and Rankin Street. Cheaper alternatives are Aralia Street, Dick Ward Drive and Cunjevoi Street.