Darwin’s reign as the fastest growing market in Australia has come to an end with Melbourne and Sydney taking pole positions.
Median house values grew modestly in the April quarter, adding 1.59% to $513,000. During April, values rose by 2.14%, taking the year-on-year growth to 11.75%. While this is still a healthy performance, it’s just half the growth recorded by Melbourne and is significantly lower than Sydney’s 17% growth.
Units performed better with median values increasing by 14.93% to $408,500 over the year to April. However, the quarterly results showed similar sluggish performance: values went up by a measly 1.24% compared to Canberra’s 6.55% and Melbourne’s 5.6% growth during the three months ending April.
While these recent numbers suggest that Darwin’s market is losing steam, Quentin Kilian, CEO of the Real Estate Institute of Northern Territory (REINT), believes Darwin remains a vibrant market for investors. “House and land sales remain strong, predominantly up to the $650,000 mark. The unit market, in particular over the $650,000 to $1m mark, is a little softer due to an oversupply, but we feel this will correct itself over the next 12 months,” he says.
Darwin will continue to be an attractive investment destination because rental returns are very high, according to Glenn Grantham, general manager of Raine & Horne Darwin. “Returns have eased back a little bit over the last six months due to the flood of top end properties entering the market. Before, you could have purchased a property for $600,000 and got $750 per week return. Now you’re getting $650, but that’s still a very good return on a national basis. When you add the strong rental returns with consistent capital growth over the last 10 years, you’ve got a good investment,” says Grantham.
Regional Northern Territory is also showing solid growth, with house values growing by 12.51% over the past year to April 2010. The median house price in regional NT now sits at $474,500. Units, again, have surpassed expectations, growing by a staggering 16.95% in the 12 months to April 2010 and now have a median price of $398,000.
Where to watch
According to Kilian, while the government is releasing more land through developments in Belamak, Johnston and Zucoli, the pace of the release is not meeting market demand. “We estimate that there is a deficit of around 4,500 to 5,000 dwellings. While the NT government has calculated land release to accommodate up to 1,700 new dwellings per annum, this does not account for the previous deficit,” he explains.
This deficit is driving up prices for land in the territory. Steve Bennett, sales manager for The Professionals, suggests that those looking to invest up north look for any piece of open land. “The NT desperately needs more housing for the average person,” says Bennett. “Those with major investment dollars could invest in rental properties for long-term consistent returns.”
“Keep an eye on land releases at Zucoli, a new suburb in the early stages of development to the southeast of Palmerston,” Kilian advises. “Also watch for new land developments in Alice Springs. This market is suffering chronic housing shortages and the government has promised to fast-track land development.”
In the CBD, Kilian suggests investors snap up bargains on inner-city units. “There are real opportunities for bargain hunters at present in the ‘top end’ of the unit market in inner Darwin,” Kilian explains.
Grantham suggests that an oversupply of units has levelled prices. “One thousand new units have come onto the market over the last three years. It’s a significant number and unit prices for these properties have hit a plateau.”