Falling prices and a sharp drop in housing supply could awaken activity in the Darwin market
Darwin continues its steady descent to the bottom of the market as property values keep on declining – but there are still positives for investors.
“Over the [September 2017] quarter, median house prices fell in Sydney, Adelaide, Perth, Canberra and Darwin, with the largest decrease of 8.3% in Darwin,” reports Real Estate Institute of Australia president Malcolm Gunning.
“Median prices for other dwellings declined in Sydney, Melbourne, Adelaide, Perth and Darwin, with the largest fall of 13.8%, again in Darwin.”
The median rental rate for three-bedroom houses in Darwin also decreased during this period.
However, there is a silver lining: the city’s average vacancy rate fell by 0.6 percentage points to 5.9% at the same time. This was the sharpest decline in vacancy rate across all the capital cities.
This can be attributed to the significant drop in housing supply in the Darwin market. According to Charles Tarbey, chairman of Century 21 Australasia, stock decreased by 30% in 2017.
“The market has suffered greatly from price decline, with dwelling values down 2.7% over the November 2017 quarter, and now as it faces a massive decline in stock, it could actually lead to more activity and potential price growth,” Tarbey says.
“As such, I think it remains a region to keep a close eye on.”
Yields continue to be strong
The decline in housing supply is due to low levels of demand from interstate investors, as well as difficulty accessing financing as a result of the poor economic situation.
“Business confidence (locally) is down, and residential construction and investment activity track so closely to the overall performance of the economy,” states Herron Todd White in its December 2017 Month in Review report.
“The positive signs are the increased sales activity … it does provide opportunities for first home owners and there has been a marked reduction in cost of living pressures.”
With Darwin having a largely transient population due to the nature of available employment, the rental market is strong.
“RP Data shows that rental yields in Darwin for both units and dwellings remain the strongest in the country, a position which has long been held. As at October 2017, gross rental yields are sitting at 5.8% for Darwin,” the report says.
“While the capital values are down in a relatively low cost financing environment, Darwin remains a viable investment option.”
SUBURB TO WATCH
MILLNER: Affordable suburb with good returns
Property values in the suburb of Millner have fallen considerably in the five years to December 2017. House and unit prices have dropped by 9.8% and 5.6% respectively, since December 2012.
As a result, apartments have become quite inexpensive, at a median value of just $351,028. The average rental yield is a considerable 5.4% which could be of interest investors with a cash flow strategy.
Millner is the site of Homemaker Village, regarded as Darwin's second-largest shopping complex. It is also at the centre of three arterial roads, namely Bagot Road, McMillans Road and Trower Road, and Darwin International Airport is on the border of the suburb.
Location: Proximity to major roads and the airport make Millner very accessible for travellers
Yield: Units in Millner offer high rental returns, coupled with a low median price