The advent of major resources projects promises more big things for the Top End – but can buyers take the heat?
Doomsayers have been sounding the death knell for Darwin’s property cycle for years. However, every time it seems like the northernmost capital’s property market is about to fall over, it keeps going.
However, even Darwin’s seemingly unstoppable growth has slowed over the last year as rising interest rates, coupled with the city’s longstanding supply shortage, pushed affordability to its limit. RP Data charts capital growth for the whole of 2010 at 4.8%, a far cry from the double-digit growth of years past; it also records median prices as falling by 1.7% in the final quarter of the year, the second-largest fall in the country (behind Perth).
A recent report prepared for the Real Estate Institute of Northern Territory (REINT) also highlights the softness of the market, reporting that house price growth has slowed since the June quarter to 2.3%, and units at 2.5%.
Even so, the signs are that this pause in price growth is nothing but a temporary lull, and the prospect of a number of significant resource projects could just be the push the Northern Territory needs to see another growth spurt.
Among the planned projects are Inpex’s proposal for a huge LNG processing facility in Darwin, Methanol Australia’s proposed $1.3bn Timor Sea LNG project, and the $1.2bn Tassie shoal methanol project.
Andrew Wilson, senior economist at APM, believes these projects will re-energise Darwin’s long-term capital growth: David Loy, president of the REINT and managing director of LJ Hooker Darwin, agrees.
“The advent of these major projects coupled with the government’s proposed infrastructure spending to support them is going to have beneficial onflows to the rest of the community,” reasons Loy. “The ramping-up of projects this year will also put huge pressure on the rental market, so there’s potential for rental yields and returns to improve significantly.”
In terms of short-term growth, Loy’s prognosis for the NT mirrors that of the country as a whole.
“At present, volumes are way down; buyers are cautious, and financing is an issue due to interest rates,” he says. “I think the first homebuyer demand is still catching up after being brought forward by the boost to the grant, and that’s having an impact on demand.”
That presents opportunities for investors, adds Loy. “There’s potential for investors to pick up older, slightly tired properties for less, renovate them and either rent them out or sell them on.”
At the moment, Loy recommends sticking to established suburbs near employment centres, and highlights Darwin suburbs Woolner, Stuart Park and Fannie Bay as safe bets. In Palmerston, he suggests focusing on older properties in Gunn, Durack and Bakewell.
