Darwin Property Market Update March 2020
The Northern Territory housing market, like other cities across Australia, is made up of several different types of demographics which choose particular locations based on pricing, house type and local amenities. Due to the wide variety of different types of home owners, we will examine the typical home owners/occupiers that make up each main region of the Darwin property landscape. From this foundation, we will then look at how this typical demographic makeup has changed post mining boom (if any), and the direct impact these changes have had on the property market in each particular sector.
Firstly, the inner sector of Darwin which comprises the CBD, Woolner, Parap, Bayview, Larrakeyah, The Gardens and Stuart Park has the highest density accommodation for obvious reasons, one being the lack of land on offer in this area (a trait in every CBD/inner city locality). Various multi-storey developments in this area were erected in the past 15 years, mainly on the back of the mining boom in the form of the Ichthys Inpex Gas project and ConocoPhillips Gas Projects. This type of property is attractive for younger professionals or empty nesters working in the CBD area, not requiring the extra space for larger families. Generally, this area comprises mainly renters but has seen an increase in owner-occupiers in the past 3 years with units becoming more affordable due to the gross oversupply in the market.
Inner Darwin units have seen a slight lift in sales volumes by 13.1 per cent at the tail end of 2019, (REINT: Dec 2019), however, this segment is still experiencing a decline year on year by 5.6 per cent to $335,000 for the median sale price. This weakening market movement is in line with the rest of the Darwin market where an over-supply and a population decrease has led to an inevitable decline in prices across the board. From the peak of the market in 2014, inner city units have experienced weakening capital values by at least 30 per cent, improving the affordability for both renters and potential purchasers alike. This segment, which at one point comprised a large portion of investors taking advantage of long-term corporate leases has now shifted to a more owner-occupied focus with an increase in affordability. The NT is now the most affordable state or territory in Australia.
In saying this, the inner Darwin segment still offers strong rental yields for potential investors, with an average two-bedroom, one-bathroom unit attracting a robust 6.2% yield. Capital values in the short to medium term may suffer however if the general weakening economic trend were to continue.
Dwellings in this inner segment are considered to be the most prestigious sector of the overall Darwin market, especially those near waterfront locations such as Cullen Bay, the marina in Bayview, Parap and Fannie Bay. This home-owner typically has purchased property before and is generally made up of owner-occupiers upgrading from lower priced segments. This segment has shown some form of stabilisation towards the end of 2019, with the latest results showing a 5.3% increase in sales volumes and an improvement of 7.4% in the median sales price to $725,000 (from December 2018). Generally, this type of home-owner is looking to be within a 10 – 15-minute drive from the city which provides access to social amenities, schooling and nightlife activities.
Moving further afield north, the Northern Suburbs locality provides the largest amount of housing for the local population at a more affordable price range. This locality has a large amount of schooling, shopping precincts and public facilities. It is made up of both units and dwellings, with a large portion of ex-housing commission homes providing entry-level options for first home buyers. The latest statistics for dwellings in this sector show an improvement in sales volumes by 56 per cent in the North Coastal region and 13.5 per cent increase in suburbs further north (year on year). (REINT: Dec 2019). Whilst these statistics show some promise, the median price has weakened in both areas by 5.9 per cent and 11.3 per cent from December 2018 respectively to $717,500 and $522,000. Due to the general weakening in house prices, we have seen a significant change from those renting to now becoming home-owners.
An entry-level three-bedroom, one-bathroom dwelling in Karama, built in the 1980s can now be purchased from $300,000, whilst an entry-level one-bedroom, one-bathroom unit can be purchased in Nightcliff for approximately $110,000. These prices have dropped 25 per cent and 40 per cent respectively from the peak of the market in 2014. Further examples of increases in affordability for this sector have come in the form of a substantial increase in bank foreclosure sales. This type of sale five years ago which generally didn’t occur has unfortunately now become a common phenomenon and is highlighting the weakening property trends in Darwin.
The final sector in the Darwin residential market which has arguably seen the greatest change over the past 5 – 10 years is the nearby satellite city of Palmerston. Located 20 kilometres from the Darwin CBD, Palmerston is a diverse community with young families living at generally cheaper pricing options than closer to Darwin. It is well facilitated by several schools, local shopping facilities (with the recent construction of the Gateway Shopping Centre) and the new hospital facility servicing residents in both Palmerston and the rural area. The average median price for a dwelling is $430,000, which is directly comparable to the Darwin North locality, however, the improvements would provide a superior amenity. The December 2019 quarter saw 99 house sales which are stronger than mid-December however still 10.8 per cent lower than a year earlier. In line with this statistic is a 3.8 per cent drop in median price to $430,000. This is contrasted with a median price of $570,000 in December 2015. Affordability for both renters and potential purchasers alike has improved not only with the decrease in population, but the strong increase in housing supply. The new suburbs of Zuccoli and Durack have had the biggest impact in this regard, with a steady amount of construction on newly subdivided land. Zuccoli is still selling a large volume of land, with an entry-level allotment of 335 square metres able to be purchased for $150,000. A house-and-land package for an average three-bedroom, two-bathroom rendered masonry home can now be purchased from $385,000. This type of product would interest those able to take advantage of Government incentives in the form of a $20,000 build bonus. We do warn, however, with the decrease in prices for existing homes, building a new dwelling may lead to a substantial amount of over-capitalisation. Put simply, building a new home in a period of over-supply of housing is generally not a smart decision and the cost to build is exceedingly out-weighing the value of a brand new home. This has become more obvious than ever with re-sales of recently built homes selling for considerably lower than construction cost.
Generally, societal changes across Darwin’s residential market is characterised by one key factor: population decline. This has had a flow-on effect in all areas of the economy, and the weakening housing market is a direct indicator. 2020 has bought with it some renewed hope, with local real estate agents identifying a surge In interest for those looking to purchase, however, we consider the market to remain fairly flat in the short to medium term.
Speak with a Darwin Mortgage Broker today.