Australia’s hottest territory remains one of the coolest when it comes to the property market
When researching a potential property purchase, you should seek strong and diverse economic fundamentals in the property markets you’re planning to invest in – and unfortunately, this is still not evident in Darwin. Continuing the same trend as the last few quarters, the city remains relatively stagnant in terms of property growth.
While property prices peaked in August 2010, the end of the mining boom in the region has led to an overall downturn – hands-on, skilled jobs have decreased as projects have moved into a management and monitoring phase. In part due to these events, Darwin currently has the lowest dwelling price-to-income ratio of any capital city in Australia.
“It really needs some of those bigger contracts to come back in and kick that marketplace back up again,” says Damien Lee, head of acquisitions at Caifu. Rental yields in Darwin tend to correlate directly with the type of work and employment available in the area, Lee explains. Tenants with larger companies may be willing to pay a premium to secure housing on the ground there for their staff. And Lee believes this can skew the overall rental figures slightly.
“They have a big defence base, a big resource base, and a lot of the staff were housed in mining camps,” he says. “However, a lot of middle and senior management we’d find housed in freestanding residential properties, whether it be apartments or houses, scattered around Darwin. Rental yield data are definitely analysed as an average, but I think some of that is averaging a little bit higher based on data sets that don’t represent the true demographic of who is actually renting real estate up there.”
Still a few hot prospects
Despite the negatives, Darwin is not without its upsides – it’s currently Australia’s most affordable capital city housing market, thanks to its high wages during an ongoing decline in house prices and rents.
Kate Forbes, national director of property strategy at Metropole Property Strategists, notes that over the past decade property prices have grown 30.3% compared to a 60.8% increase in household incomes.
“The weakness has been exaggerated in the lower-valued housing stock, as well as in the most expensive stock, reinforcing our recommendations to stick to the middle of the bell curve when buying,” says Forbes.
SUBURB TO WATCH
FANNIE BAY: Between the city and the sea
Stretching between the coast and the Darwin CBD, Fannie Bay is a prestigious city suburb known for its scenic waterfront views. Unfortunately, it hasn’t been immune to the decline in property prices that’s affected much of the rest of Darwin, with figures indicating significant drops in prices during recent years. Units have suffered the most, recording a 32.2% downward slide in the last three years.
However, these drops appear to be slowing – and despite the dip in property values, Fannie Bay remains an intriguing prospect for investors. Both houses and units still offer an indicative gross rental yield of 4.3%.
Tourism: The Fannie Bay Gaol Museum and Fannie Bay Racecourse are popular local attractions
Yield: At 4.3%, average rental returns remain strong in this prestigious city suburb
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