The Top End has the best yields in the country, but falling prices make it an investor’s nightmare
As residential projects wrap up construction, more and more stock is being poured into Darwin, exacerbating the already fragile property market.
“Darwin faces an oversupplied situation currently as a result, with more properties being delivered to the market than are being sought,” says Kate Forbes, national director of property strategy at Metropole Property Strategists. Demand has been heavily stunted for years as the NT has not been able to recover economically, ever since the mining sector went under.
“Poor growth and employment prospects have meant that Darwin hasn’t benefited from either internal or international migration,” Forbes says.
“This lacklustre population growth – zero, in fact – is unlikely to change soon.” Though property values are continuing to nosedive, landlords have seen rental yields skyrocketing. Darwin has the highest returns in Australia, with the average for houses being 5.6% and for units 6.3%. However, this is more the result of prices dropping faster than it is of rents increasing.
“This will cap any chances of meaningful growth for the short term,” says Forbes.
Land tax talks
The overall downturn has placed such a strain on the Top End’s funds that the possibility of implementing a land tax is in consideration, something Propertyology managing director Simon Pressley believes is a risky move.
“The Northern Territory is the only jurisdiction in Australia without a land tax, and it seems strange that one would consider taking away such a strategic advantage – that is, the incentive to invest,” he says.
Pressley instead highlights the initiatives of the township of Katherine to improve its appeal through infrastructure upgrades.
“Katherine plays an important role in Australia’s national security and is home to the Tindal RAAF base. A $500m upgrade of the facility, including a new control tower, has recently commenced,” Pressley reports.
“The construction workforce would peak at around 250 people in 2019 and hold at that level for several years.”
This project could help bring residents into what is regarded as the second-largest township in the NT, even if the population is just transient. This could, at a minimum, boost Katherine’s rental market, which is also reasonably stable.
“Katherine’s median house price has remained flat for four years. A typical house today costs circa $350,000,” Pressley says.
SUBURB TO WATCH
LEANYER: Units are hanging on
Initially established as a military base during the Second World War, Leanyer has since become an amenities-filled suburb that caters well for families.
There are a number of schools in Leanyer, including Leanyer Primary and the Good Shepherd Lutheran College. The Casuarina Coastal Reserve is nearby, as well as a beach. There is no shortage of parks, including Holmes Jungle Nature Park, Leanyer Swamp and Leanyer Recreation Park. Shoppers flock to nearby Hibiscus Shoppingtown.
Over the year to April 2018, units managed to keep price drops to just 3.9%, as compared to the 8.2% fall in house values. Average yields earned on unit rentals (5.3%) were also higher than yields on houses (4.9%).
Yield: Units have a high average yield of 5.3%, while houses offer returns of 4.9%
Amenities: The Casuarina Coastal Reserve is close by, along with parks and a shopping centre