The performance of the Darwin property market – one of Australia’s best performers over the last decade – has faltered in the last year. The interest rate rises that slowed the market over the course of the year have put the brakes on the territory capital and its satellite town Palmerston by stretching affordability – already a problematic issue – to its limits.
As a result, market activity has slowed by the largest margin in Australia: Residex reports that the number of year-on-year transactions fell by 31% in the 12 months leading up to February. That fall in activity has seen median prices move sideways in the latter half of 2010, and experience limited falls in the early months of 2011 (Residex figures for February show negative growth of -0.66% in the median house price, and -1.04% for units).
First, the fundamentals for the city remain solid, as RP Data research director Tim Lawless notes.
“Wages in Darwin are the second highest of any capital city (after Canberra) and the Northern Territory has the country’s lowest unemployment rates,” he says. “The resources sector is humming along, there are myriad of infrastructure projects underway and government remains active in the region, particularly in the defence sector.”
“The defence force really underpins the Darwin housing market,” says Lindeman. “For every member of personnel that’s overseas, there are 10 in Darwin supporting him or her, and that drives rental demand. We’ve already got troops in East Timor and Afghanistan: the instability in the Middle East is likely to mean that more are posted overseas. The Japanese tsunami is also requiring relief effort, so that may mean more government presence, and a property market boost.”
“Due to the nature of the work, we see a high turnover of tenants,” says Lindeman. “That in itself keeps rents high – which attracts investors who push up prices. Also, the fact that many rents for personnel and family are subsidised, and troops who return from overseas often have money to burn, means that those high rents are sustainable.”
That’s reflected in the rental yield figures, according to Residex. Darwin still has the highest average yields compared to other capital cities at 5.17% for houses and 5.3% for units.
There’s also the likelihood of further resources activity on the horizon. Inpex’s $23bn processing facility is creeping ever closer, which is predicted to bring both workers and supporting businesses to Darwin and boost its already strong population growth. The ABS recently revealed that NT has the largest population turnover of any state, at 7%, while population growth remained robust at 2.3% for the five years to December 2009.
Even so, Lindeman maintains that the defence force will continue to underpin the city.
