No massive turnaround is being predicted for the Top End any time soon, as the market buckles under a weak economy
Investors in Darwin may be hoping for a change in the market’s prospects, but it’s not one that will come in the next few years, as BIS Oxford Economics forecasts minimal growth.
“Without a strong turnaround in the economy or the demandsupply balance, only moderate house and unit price growth of 7% and 8%, respectively, is forecast to June 2022, mainly toward the end of this period as supply begins to tighten,” says associate director Angie Zigomanis in the firm’s Residential Property Prospects for 2019 to 2022 report.
The lack of employment opportunities and job security in Darwin has held back demand as well as population growth. The stringent limitations on obtaining credit are also making it difficult for buyers to snag established properties, as there is little confidence in this neck of the woods.
In addition, the Darwin market is languishing in oversupply, with vacancy rates off the charts. Over the 2018/19 period, total returns from residential property have also declined throughout the state, according to CoreLogic data. Rents fell by 4% in the 12 months to July 2019, and very few premium properties are being sold.
However, the steady freefall in property values has resulted in ever-increasing affordability, with more units in particular selling at under $400,000. In the same period, 67.4% of unit sales in Darwin were of dwellings at that price point; this percentage is up from 61.2% recorded in 2017/18. In the regional pockets, a whopping 77.1% of units sold at under $400,000, while 39% of houses sold at this price point.
Thus, even though professional sentiment towards Darwin remains cool, there is a silver lining for investors to hold on to. For one, the market is predicted to see some rental growth over the next 12 months as Darwin remains the capital city with the highest average yield among its peers.
“While property professionals are reporting that confidence is somewhat lacking in the NT, there are areas of positivity and encouraging activity within sections of the market,” says Libby Greenwood, retail general manager at NAB SA and NT.
“Owner-occupiers have become more active in the new housing market in NT, while first home buyers are the dominant players. For established property, it’s the upgraders who are most active.”
EAST SIDE: A rare growth market
One of the few suburbs in the Northern Territory that is recording steady, positive growth, East Side is certainly a market to watch.
House values soared by 10.3% in the year to July 2019, following a trend of double-digit growth observed since 2014. As a result, the median price has edged past the $500,000 mark. This type of property also offers relatively strong yields, at an average of 5.5%.
On the flip side, unit prices dropped by 4.5% in the same period, taking the median value to below $300,000. Nonetheless, returns were also high, at 5.7%. In both markets, rental rates were up by around 4%.
Growth: East Side is one of the few suburbs recording positive growth in the NT
Rent: Rental rates increased by around 4% in the year to May 2019
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