Darwin property luring investors with prices last seen a decade ago

After a decade in the doldrums the Darwin property market is dusting off the cobwebs, and with 2015-level prices on offer, astute southern investors are homing in on the Top End. 

Despite growing 28.1 per cent over the past five years, Darwin dwelling values remain 0.5 per cent below a decade earlier, and down 2.7 per cent down on their May 2014 peak, according to Cotality (formerly CoreLogic) data released on 1 May. 

The median dwelling value of $526,410 — well below all other capitals — along with healthy rental yields and the prospect of future growth is luring investors from the eastern seaboard.

Darwin was the leading city for price growth in April, notching up capital growth of 1.1 per cent. Nationally, only regional South Australia (1.5 per cent) and regional Western Australia (1.3 per cent) performed better.

“The biggest difference is investors have come back into the market,” LJ Hooker Darwin Managing Director David Loy told Australian Property Investor Magazine. 

“Before then, if we saw an investor in the past seven years, we’d kind of put them in the car and wouldn’t let them out,” he joked. 

“They were fairly rare.”

The gross rental yields in Darwin were 6.7 per cent, and 7.7 per cent for the rest of the Northern Territory, of which Alice Springs is the dominant market. 

Buyers’ agents from the southern capitals were active in the market, with Darwin houses prices between $450,000 and $650,000 the most sought after. 

“Darwin is seen as having very good yields, 6 per cent-plus on residential,” Mr Loy said. 

“We’ve got a fair few buyers agents working in the market from interstate. 

“They’ve got a certain criterion of where they want to sit in the market, sort of $450,000 to $650,000, in that price range.”

Three to four-bedroom houses on lots “from 490sqm to 800sqm”, and with relatively low garden maintenance required, were the most sought after. 

Mr Loy said for the first time in 35 years as an agent he was seeing many properties being bought sight unseen, mainly by southerners via southern-based buyers’ agents. 

“Surprisingly, I’ve never seen so many properties bought sight unseen,” he said. 

“A lot of buyers have just looked at videos and all that sort of stuff, and they’re just chasing the yield. 

“But all the inspections are done, and the property reports are done, buildings are inspected, so there are a lot of checks and balances still,” Mr Loy said. 

No population driver

Darwin, which has a population of just 140,000, is far smaller than the other capitals, with the lack of population growth a key factor in the sluggish market over the past decade. 

“Our population hasn’t grown, so our market has relied really on owner-occupiers, people coming to town and instead of renting staying because of the job market,” Mr Loy said. 

“There’s been basically no growth in population, so it’s been quite a steady market for the past seven or eight years.”

With some modest price growth in recent months, and some positive news on the jobs market, Darwin was increasingly on buyers’ radars. 

“Now there’s a lot of good news about Darwin, a lot of oil and gas, rare earths and defence, in both Darwin and Kathryn,” Mr Loy said. 

“There’s a little bit of an upbeat feeling about the whole Northern Territory at the moment, but we’re still very short of skilled labour, like every other state.”

Andrew Harding, selling principal at Ray White Darwin, said “super low supply” and strong yields were attracting interstate investors. 

“The market hasn’t moved much over the past 10 or so years but the last quarter we saw just shy of 3 per cent growth,” he told API Magazine. 

“There’s been a lot of inventor interest and super low supply, so Darwin’s back on people’s radar.”

Mr Harding said strong yields — “6 per cent to 8 per cent” and up to “8.5 per cent to 9 per cent on some properties” — was a major drawcard. 

He expected to see healthy growth in the market, although he didn’t expect a major boom. 

“I don’t expect to see double digits in a single year,” he said. 

 But over two to three years he expected there would be solid returns. 

“It’s mainly houses and mainly people from interstate,” Mr Harding said.

Top End rental growth 

Darwin’s annual rental growth trend has also gained momentum, from 3.2 per cent a year ago to 5.0 per cent over the most recent 12-month period to the end of April.

Mr Loy said buyers were drawn to existing stock, with properties trading at below replacement cost. New-build and newer properties were substantially more expensive. 

“All the existing stock is what the investors are buying,” he said. 

“So obviously there’s going to be pressure on that stock so those properties will increase over the next 12 months I’d say.”

The low price point of established homes was driving investor demand. 

“People have been to other regional areas and once the property prices there have increased enough, they sell and move on somewhere else,” Mr Loy said. 

“So, at this time sellers are on the lucky end of it.” 

New house and land packages were selling for about $750,000. 

“Even with all the incentives the government is giving out, you get a $50,000 incentive to buy a new home at the moment, a house and land package, it’s still a $750,000 purchase,” Mr Loy said. 

“I’ve got a son and I’m telling him to buy a property now because you can feel and sense that the property market in the Territory is going to move upwards for sure.”