Is Darwin just suffering from growing pains?
2016 could be a buyer’s year for Darwin, with falling capital growth offset by high rental yields
The once-booming, long-suffering market of Darwin has been dealt another blow in the December quarter, dropping -4.05% and dragging annual capital growth down to just 0.91%, according to Eliza Owen, market analyst at OnTheHouse.com.au. “Darwin units were the worst-performing dwellings among the capital city markets, with the median values falling 6% for the year,” she says.
“Since the sharp fall in commodity prices, the value of houses is steadily coming down, and units more markedly so. At January 2016, units in the NT were at their lowest value since March 2012.”
Daniel Harris, director of projects at Real Estate Central, says the removal of the First Home Owner Grant for existing dwellings – resulting in more new construction in an oversupplied region – has added further woes. But he is still optimistic about investor returns. “For the past decade, [Darwin has] consistently held the title for the highest rental yields of all the capital cities,” he says. CoreLogic February data cites a 5.3% gross rental yield, and there are “opportunities still available for 7% or more”.
The recent controversial leasing of the Port of Darwin to Chinese company Landbridge Corporation has raised Darwin’s profile among Chinese investors, says Harris. The strengthening reputation of Charles Darwin University and quick flights to Asian hubs are adding to its appeal. “[It] is certainly an interesting trend that could have an enormous impact on prices in the CBD region over coming years.”
Harris believes 2016 could prove to be a good year for buyers to enter the market. “Demand has already improved in 2016; however, there is still significant supply on the market that needs to be absorbed before we see price growth again,” he says.
With first home buyers purchasing off the plan to nab the $26,000 grant (house and land packages in outlying suburbs such as Zuccoli are proving to be a hit), existing properties in affordable suburbs are being discounted by vendors struggling to sell. “This is presenting a great opportunity for yield investors,” says Harris.
It’s not all roses though, as REINT’s December real estate report reveals Darwin’s vacancy rate increased to 8.2% for houses and 9.2% for units. REINT CEO Quentin Kilian says while this can be attributed to additional supply that’s come into the market, there is also “a real issue of a declining population”.
Therefore, success in Darwin comes down to finding niche markets with future appeal. Areas experiencing gentrification, such as older streets of Larrakeyah
and Stuart Park
and pockets of the city, could provide growth opportunities, says Harris.
Paul Herron, owner/principal at Belle Property Darwin, adds that “houses in ‘blue chip’ inner-city suburbs, and those in coastal suburbs, will always be in demand for their large blocks, proximity to the city and foreshore”. He believes that in the short term, Darwin is only experiencing “growing pains”, and there is still a bright long-term future ahead for the Top End.
SUBURB TO WATCH
Alawa defies Darwin downturn with strong yields
Waterfront residences, generous houses and proximity to everything Darwin has to offer has set the suburb of Alawa in top spot for renter demand. Enjoying a vacancy rate of 0.48% – the lowest in the NT, according to REI data – and a rental return of over 5%, Alawa is defying the Darwin market downturn.
This is in part due to its high number of detached three-bedroom houses, which real estate agents confirm are the most highly sought-after dwelling type in the NT. With the exception of 2011 when its values dropped 5%, in line with an overall Darwin market depression, Alawa has experienced excellent positive growth for the past decade.
Located 10 minutes’ drive from Darwin CBD, 20 minutes from satellite city Palmerston, and a quick jaunt from the popular dining and nightlife suburb of Nightcliff, Alawa is popular with university students and families.
Paul Herron, owner/principal at Belle Property Darwin, says “Alawa is an older, established, leafy suburb next to the Charles Darwin University campus, Menzies School of Health Research, Casuarina Shopping Centre [and] close to Royal Darwin Hospital”.
Properties on streets around Stasinowsky Street fetch prices at the higher end of the median, although neighbouring Lakeside Drive is a major thoroughfare, with values below the median due to its congestion and road noise.