A recovery period draws nigh for the Top End as resources sector investment is expected to bottom out
Darwin continues to stagger under the weight of the mining boom decline, with oversupply and slow population growth on its list of problems.
“Prices are still falling, and they’re likely to keep falling for much of this year. Darwin had a net increase of 153 jobs last year, showing how badly its economy is languishing,” says Michael Yardney, CEO of Metropole Property Strategists.
Since the state property market peaked in 2010, dwelling values have fallen by nearly 15%, lending support to Yardney’s belief that investor-driven markets are more volatile than the large capital cities; thus, it may be wise to avoid them.
Multifocus Properties & Finance CEO Philippe Brach agrees with Yardney’s view. “[Darwin is] just too far and too small,” he says.
He points to rising interest rates as another factor in Darwin’s steady downfall.
“When you’re raising interest rates, it’s a very blunt instrument because the intention is to cool down Sydney and Melbourne, but in effect, because it’s a national measure, it will also affect areas that are not benefiting from a boom – like Perth, Darwin or Adelaide.”
Skies may soon clear for Darwin
The near-completion of the Ichthys LNG project puts more downward pressure on prices as well. Falling commodity prices continue to stunt the performance of the mining industry, according to the Residential Property Prospects 2017 to 2020 report published by BIS Oxford Economics.
“Migration flows and population growth are now weakening and the Northern Territory market is in oversupply, reflected in Darwin’s vacancy rate of 7.8 per cent in March quarter 2017,” comments Angie Zigomanis, senior manager at BIS Oxford Economics.
The apartment market will be hit the hardest since there is a lot of excess stock here. In the period leading up to June 2020, unit values could plummet by as much as 11%, whereas the median house price should slip by around 8%.
A silver lining is on the horizon for this state, however: while prices are expected to continue dropping throughout 2017 and 2018, the market should bottom out by 2019. Thus, some upside is anticipated to come through by 2019 and 2020 once the Top End fully deals with the effect of the mining sector decline and some demand comes in to alleviate the oversupply.
Zigomanis believes that as a smaller market Darwin certainly has more downsides than Perth, but the undertaking of a major project creates a stronger effect in the former than in the latter.
SUBURB TO WATCH
RAPID CREEK: Units go downhill in beachside suburb
Tucked in between Casuarina and Darwin is the suburb of Rapid Creek. It is mere minutes from the beach, while offering quick access to Charles Darwin University and the Royal Darwin Hospital.
The Rapid Creek foreshore is lined with cafes, pubs and restaurants. Nightcliff High School and Essington School have been established here as well, making it an ideal suburb for students of all ages.
The appeal of Rapid Creek for families is evident in the popularity of houses in this suburb – prices are rising even in the weakened NT market. By contrast, units are in a significant and consistent decline, although this has made such properties quite affordable.
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