Yet again, Darwin has confounded the critics. With its median house price increasing by 280%, predictions that its decade-long growth spurt is coming to an end seem to be premature, with RP Data crowning Darwin as the best performing city for capital growth over the year leading up to January 2011. It was also the only city in Australia that showed an increase in the median house price in January, growing by 2.5% to $550,000.
With a market that’s often seen as one of the most expensive in a country facing a growing affordability problem, what’s the reason for Darwin’s ongoing strength? Quentin Kilian, chief executive of the Northern Territory’s real estate institute, puts it down to an increasingly rosy future for the region.
"There’s a lot of mining and resources activity taking place, both now and gearing up for the future," he says. "The final investment decision on [a massive natural gas project planned by] Inpex is due later this year, and while it’s not set in stone, the indications are very positive. That’s expected to bring 5,000–6,000 people to the region in five to six years – although many of those will be living on-site – and with it, significant ancillary industry."
This impending resources boom is bringing buyers back to the market. "Anecdotally, we’re seeing bargain hunters in the market, eyeing up potential rental properties for resources workers," adds Kilian. "Our agents are commenting that interest is picking up across the board, with more people turning out to open houses than in the last quarter of 2010."
The unit market also appears to be recovering after an appalling 2010. "The unit and townhouse market was suffering from an oversupply last year," adds Kilian. "However, we’ve seen a 8.5% jump in unit/townhouse sales, primarily in inner Darwin. Admittedly, that’s still down 30% from previous years, but it’s clear that people are looking at the unit market again."
Even so, BIS Shrapnel economist Angie Zigomanis cautions that investors should be wary about jumping in before the ink is dry on the Inpex deal. "Inpex always crops up in our three-year outlooks, but it’s always at the end of the three years – and it keeps getting pushed back."
The growth of the resources industry is also bearing fruit for some of the Territory’s regional towns – which are facing even sharper supply issues than Darwin.
"Tennant Creek and Katherine are experiencing high demand for accommodation and massive shortages," explains Kilian. "There are several sizeable mines near Tennants – its population is 3,500, but predictions are that it will be between 10,000 and 12,000 in five years. We’re seeing excellent growth: sale prices have already gone up by $30,000-40,000, which considering they were just $120,000, the increase is huge."
Alice Springs is also on the up: Kilian reckons rental yields are rarely below 6%, such is the demand for accommodation.
