The lack of employment opportunities in the Top End continues to turn investors away, despite high yields
The freefall of prices in Darwin’s property market may be slowing down compared to a year ago, but there’s still room for prices to fall further.
Malcolm Gunning, president of the Real Estate Institute of Australia, points out that the decrease of approximately 20% in the year to March 2018 shows a further decrease in prices from March 2017.
“Rental affordability is decreasing in much the same way as housing affordability,” he adds. “This has to do with competition for rental accommodation dropping.”
Gunning attributes this slow demand to the fact that Darwin offers very few economic prospects – projects in the pipeline are nearing completion, while there are very few plans to create more jobs.
“There are major gasworks which could be completed by the end of 2018, and there is no other major project other than the proposal of expanding the wharf for American warship visits. But that’s in the planning stage, so there’s nothing scheduled.” The economy is also hampered by a lack of diversity, and the tourism industry is being limited by location.
“Tourism has continued to decline. There’s little Asian tourism, because most of the major tourist sites are difficult to get to. They can’t fly in and fly out of places like Kakadu or Litchfield – they’re long day trips, which international tourists are not looking for,” Gunning explains.
High returns are not enough
CoreLogic data indicates that Darwin recorded the greatest increase in rental yields in the year to June 2018, at 0.3%. The capital also had the highest yield of all its peers, at 5.7%.
However, returns won’t help draw eyes to the market.
“I don’t think it’ll appeal to investors because of the lack of capital growth. I don’t think interstate investors will buy residential properties in Darwin,” says Gunning.
Empower Wealth research director Jeremy Sheppard says, “Investors should prefer to get a high yield from rising rents, not from falling prices. Yet rent growth in Darwin went negative by 5.9% over the last year. Sales turnover is yawn-like – it can easily take four months for a property to sell. And quite often the seller has to drop their asking price by more than 8% to get that sale. Few properties go to market via auction and half of those that do are passed in.”
SUBURB TO WATCH
BAKEWELL: Values go lower and lower
While not far from the Palmerston CBD, the suburb of Bakewell is mainly known for its abundance of well-kept parks. The largest park in the suburb lies directly between Bakewell and neighbouring suburb Gunn, and is a favourite recreational spot for families. It has three large man-made ponds and a children’s playground.
The Top End’s overall poor performance has had its effect on this suburb, and property prices are continuing their freefall despite very strong returns on rents. Among renters, there is a little more demand for units than houses. Rental rates for the former fell by only 1.4% compared to 4.3% for the latter.
Affordability: House prices are just under $450,000, while unit values are below $300,000
Amenities: Bakewell offer family-friendly facilities such as parks, ponds and playgrounds
