Vendors take losses to unload properties as the weak economy causes a continued decline in Darwin house prices
The after-effects of the mining boom continue to dog Darwin as the economy struggles on.
“As opposed to the east coast capital cities where many jobs are being created, Darwin had a net increase of only 153 jobs in 2017, showing how its economy is languishing,” says Michael Yardney, CEO of Metropole Property Strategists.
“Darwin does not have significant growth drivers on the horizon and would be best avoided by investors.”
The city’s poor economic performance has indeed sustained the property market’s downward slide, and this trend is not expected to let up throughout the year.
“While some are suggesting that it’s near the bottom of the market cycle, I believe that house prices are likely to keep falling for much of 2018,” Yardney states.
CoreLogic’s Pain and Gain report for the June 2017 quarter supports this assertion, as a significant proportion of Darwin properties were resold at a loss – the largest proportion since August 2001.
Unit owners in particular have had a hard time, with over 50% of such properties reselling for less than the original purchase price. The report also notes that this percentage increased over the quarter.
Good location attracts potential residents
Nonetheless, some pockets of the Top End are managing to thrive, despite the overall conditions. In Litchfield, for instance, 78.9% of resales were made at a profit, followed by Palmerston and Darwin at 67.2% and 59.6% respectively.
Inner-city areas are favoured by both owner-occupiers and renters, according to Herron Todd White’s Month in Review for October. These residents are looking for well-located suburbs that are close to shopping districts and the CBD. Houses in these pockets are situated on good-sized blocks of land measuring a minimum of 800sqm, were typically constructed in the 1960s, and are in the $700,000 price range.
With the continued decrease in prices as a result of the economy and the influx of considerable supply following the 2012–14 construction boom, units in the inner city can go for $250,000 $300,000. This could represent a necessary transition to high-density living.
Even though its growth potential seems limited at this point, investors with a yield-focused strategy could nonetheless find opportunities in the Darwin market. Rental yields have remained fairly steady at over 5% for houses and 4% for units.
New infrastructure is also being constructed to prop up suburbs beyond Darwin – for instance, Zuccoli in Palmerston is being served by the Gateway and Coolalinga Shopping Centres.
SUBURB TO WATCH
GILLEN: Houses recovering in Alice Springs suburb
Despite Darwin’s poor prospects, there are some suburbs hanging in there, and Gillen is one of them.
Named for anthropologist Francis James Gillen, the suburb is less than 10 minutes from Alice Springs by car. Thus, residents have easy access to the town’s amenities, such as recreational parks and the bustling entertainment scene. Students are also close to several schools, and to the Alice Springs campus of Charles Darwin University.
In Gillen, the house market saw a slight recovery of 0.1% over the 12 months to October 2017, after prices fell by 2% over the previous three years. With the median house value at just over $450,000 and a strong average yield of 6.2%, it certainly offers reasonable opportunities for investment.
Education: Gillen is close to Charles Darwin University’s Alice Springs campus
Affordability: Median house and unit prices are both reasonably low