Confidence in the Top End needs to improve, but the floundering economy and job market do nothing to inspire investors
A lock of growth drivers is keeping Darwin grounded.
“The Darwin property market peaked in August 2010, is still suffering from the effects of the end of our mining boom today, eight years later, and our research suggests that house prices are likely to keep falling for some time yet,” says Metropole Property Strategists CEO Michael Yardney.
“Darwin does not have significant growth drivers on the horizon and would be best avoided by investors. As opposed to the east coast capital cities where many jobs are being created, Darwin had a net loss of jobs last year, showing how its economy is languishing.”
While demand has been increasing in some pockets due to the very low prices, Darwin as a whole is not expected to see growth take place.
“Darwin’s demand-to-supply ratio (DSR+) for May 2018 was 49 out of 100. This means supply exceeds demand. It doesn’t sound very positive, but two years ago the DSR+ was only 42. It’s been rising in fits and spurts since then,” says Jeremy Sheppard, director of research at Empower Wealth.
“I wouldn’t expect to see any price growth in Darwin until the DSR rises up into the high 50s. There’s a lot of confidence that needs to return to the market before that will happen. Indications from property data metrics show that’s not happening yet.”
Market set to flatten
While property markets generally see an upswing after bottoming out, Sheppard does not believe Darwin is set to soar any time soon. “It looks like most of the correction is over for Darwin. But don’t expect this market to bounce off the bottom. Most property markets just go flat after a correction, and Darwin has little reason to deviate from that tradition,” he says.
“The only good statistic that Darwin has is its yield of around 5.4%. This is the highest for any state capital city, though 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.”
Price falls are slowing down in this area compared to the previous year, but it seems like buyers continue to have good reason to back off.
SUBURB SPOTLIGHT
LARAPINTA:
Located on the western side of Alice Springs, the small suburb of Larapinta has been performing admirably in spite of the NT’s position as the weakest property market in the country.
Both houses and units saw price increases of approximately 4% over the 12 months to May 2018. For apartments, this is the first positive figure recorded since 2013 and suggests that the market is getting stronger.
Weekly unit rental rates have also risen by nearly 5% over the same period to a median rental of $378, coupled with a remarkably high average return of 7%.
Meanwhile, the house market in Larapinta has simply been maintaining its place in the black. Properties remain affordable at under $450,000.
Growth: The unit market experienced growth for the first time in five years
Yield: Larapinta offers very high average yields of 6.2% for houses and 7% for units
