Darwin’s waterfront views, eye-watering rental yields attracting interstate investors

Interstate investors are increasingly turning their attention to Darwin, where affordable A-grade property is delivering the country’s highest rental yields.

Australia’s smallest capital city, with just 149,500 people, has a tropical lifestyle that appeals to those who have long called the Northern Territory capital home as well as to more transient resident populations, many of whom enjoy waterfront views from luxury homes or high-rise apartments.

City living is unusual in the Northern Territory capital due to limited stock and an average rent of around $900 a week, says Gerdi Soon, Business Development Manager and Property Manager at Ray White Darwin City.

Gerdi Soon, Business Development Manager and Property Manager, Ray White Darwin City

“For luxury apartments you don’t really get long term tenants, with so many people coming for six months of the year or just for fixed contract periods,” Ms Soon told Australian Property Investor Magazine (API Magazine).

“That is mostly dentists and doctors; professionals, who live right in the city, and I do have a steady stream of investors from here and around the country calling to buy units in Darwin, sight unseen.

“That’s because the demand is there.

“Darwin is a transition city; people are coming and going all the time - nurses, students, defence personnel who all sign for one-to-three-year contracts - and that’s just how the cycle goes every year.

“The new Charles Darwin University precinct is getting built in the CBD too, which means more students and more demand for one-to-three-bedroom units in the city area.”

Northern Territory capital’s gross yields best in Australia

Locals tend to live outside the inner-city area.

“You don’t find locals living in the city or living in the units, they’re mostly living remote in places like Humpty Doo,” Ms Soon said.

“If you’re an investor, look at the units in the norther suburbs, near the inner city. You have tenants ready to move in.”

CoreLogic’s Unit Market Update (24 April) shows vacancy rates in Darwin are at 1.8 per cent, on par with Canberra.

Other capitals have comparably less rental vacancy with Hobart (1.5 per cent), Sydney (1 per cent), Brisbane and Perth (0.7 per cent), Melbourne (0.6 per cent) and Adelaide just 0.3 per cent.

Darwin’s median rent is $505, down monthly by 0.4 per cent, quarterly (-0.4 per cent) but up on the annual rate at 7.3 per cent growth.

“Two of the most popular suburbs in Darwin are Nightcliff and Rapid Creek.

“The five-year rental change in Nightcliff for units has increased 28.6 per cent, so, if in 2018 you received $230 per week now it’s $450 per week, which at 6.4 per cent is very good,” Ms Soon said.

Three-bed, two-bath apartment in Darwin CBD, leased at $770 per week.

“For example, there are two recently leased properties in nearby Stuart Park and Darwin City.

“The Stuart Park property is a three-bedroom, two-bathroom apartment that was leased off-market for $680 per week, while the Darwin City property is a three-bed, two-bath apartment that leased for $770 per week.”

The latest research by CoreLogic into the national unit market positions gross yields in Darwin slightly higher, however, at 7.3 per cent they are the highest in metropolitan Australia.

This compares to Perth (at 6.2 per cent), Brisbane (5.4 per cent), Adelaide (5.2 per cent per cent), Canberra (5.1 per cent), Hobart (5.0 per cent), Melbourne (4.4 per cent) and Sydney (4.10 per cent).

Darwin is also the only capital city nationwide to see unit rents decrease over the quarter (-0.4 per cent) while elsewhere nationally unit values increased 0.6 per cent.

Darwin units cheapest in country

The most recent CoreLogic data showed total unit listings changed from the previous year and previous five-year average, up 0.8 per cent compared with last year, but down 1.8 per cent compared to the five-year average.

That change, as at the end of March 2023, saw Darwin unit values drop in the last month by 0.6 per cent, in the past three months by 1.6 per cent, but compared to the previous 12 months are up 1 per cent.

CoreLogic showed in early April, the median unit value was $374,071.

With a median value of more than $775,000, units across Sydney are more expensive than the median house values of Brisbane ($772,020), Adelaide ($694,818), Hobart ($691,859), Perth ($593,385) and Darwin ($582,415), according to CoreLogic data released Monday (24 April).

“Middle-priced apartments, two-bedroom and two-bathroom minimum or single bathroom apartments are not as attractive to prospective tenants.”

Property price growth up 20 per cent

Ms Soon says the southern Darwin suburbs are increasing in popularity too, particularly in the new Zuccoli estate.

“We don’t have much in the way of new builds for units, though there are a couple coming, but for houses, yes, like in Zuccoli which is growing fast.

“Zuccoli is more of a suburb for locals who have been living in units but now they’re moving into their own homes.

Three-bed, two-bath apartment at Stuart Park, leased off-market at $680 per week.

“It’s in the Palmerston area and it’s growing a lot and the demand is here,” Ms Soon said.

“Price growth throughout Darwin and Palmerston has increased 20 per cent, and by as much as 40 per cent in some pockets, since the pandemic.

“The highest price growth since 2020 would be in Palmerston suburbs such as Driver, Gray, Durack, Woodroffe and Bakewell however the rent return is lower compared to the popular suburbs.

“Your best growth in inner city suburbs are Stuart Park, Larrakeyah and The Gardens,” Ms Soon said.

Interstate investors dominating Darwin property market

In the latest quarterly API Magazine Property Sentiment Report, released last week, almost 11 per cent of investors identified Darwin as having the best investment prospects in Australia. This was up from just 6 per cent only three months earlier, and is more than double the proportion of survey respondents living in the Northern Territory. 

“The majority of our landlords are interstate investors,” Ms Soon said.

“Locals buying for themselves, including those returning from overseas, are choosing the newest suburbs such as Zuccoli and Muirhead.

“Born and bred locals are buying rural, such as in Virginia, Humpty Doo and Bees Creek,” Ms Soon said.

“Houses in northern suburbs, with three-bedrooms and two-bathrooms as minimum plus a shed, and extra granny flat as a bonus, are popular,” Ms Soon said.

Overall, Darwin’s dwelling values were up 1.6 per cent in the 12 months to March 2023 compared to Adelaide (up 3 per cent), Perth (up 1.9 per cent), and Hobart, Sydney, Melbourne, Brisbane which declined over the past year by 12.9 per cent, 12.1 per cent, 9 per cent and 8.6 per cent, respectively.