Irreverent Darwin evolves into serious investment alternative

It’s not at the forefront of investors’ thoughts but with one of the highest gross rental yields in the country, Darwin should probably be regarded as a viable property alternative to the declining markets of Australia’s biggest capitals.

Known more for its tropical lifestyle, crocodiles and zany NT News headlines revolving around aliens and nudity, it’s appeal as serious property investment location is no laughing matter.

Rental yields for Darwin are currently sitting at 5.6 per cent for houses and an impressive 6.6 per cent for apartments, with industry experts predicting Darwin will continue to be an excellent choice for investors in 2022.

The vacancy rate of 0.6 per cent makes it the tightest rental market in mainland Australia, at almost half that of the national average of 1.1 per cent. Melbourne (1.9 per cent) and Sydney (1.6 per cent) are closer to the healthy market rate of 2 per cent but around three times that of Darwin.

In 2020 and 2021, many city dwellers from around Australia made the move to Darwin to escape lockdowns and enjoy the laidback Northern Territory lifestyle, which pushed up property values and led to an increase in rental prices.

Alongside domestic migration, the announcement of major construction projects, including a third train line and upgrades to Charles Darwin University, is expected to attract more skilled workers and international students to the NT.

Rents rising

Australians unfamiliar with the Darwin property market might be surprised to hear that the capital has seen some of the highest annual increases in rents over the last 12 months.

According to CoreLogic, median weekly rents for a house are sitting at $631, a 5.2 per cent increase compared to 12 months ago, and $461 for apartments, an increase of 5.0 per cent.

Tim Lawless, Head of Research at CoreLogic believes the re-opening of international and domestic borders has positively impacted Darwin’s property market over the last few months for investors and homeowners.

“A rebound in migration rates as state and international borders reopened could partially explain the renewed exuberance, along with persistently low advertised stock levels and strong economic conditions,” Mr Lawless said.

However, with the chronic shortage of properties, renters need to be prepared to fight for a property.

At the start of 2019, more than 1,400 properties were listed for rent. Today that figure is just over 300.

Northern capital growth

Unlike other capital cities, which are beginning to see dwelling values decrease, SQM Research shows that Darwin dwelling values have increased by 3.2 per cent over the last quarter and 8.7 per cent compared to twelve months ago.

Despite the increases over the last year, dwelling values are still 12.5 per cent below the record high the Darwin property market saw in May 2014.

CoreLogic data shows that median house values in Darwin are currently sitting at $576,149 and apartments at $371,138, with apartments seeing an increase of 15.2 per cent over the last 12 months.

For first home buyers looking to break into the Darwin market, Palmerston, 20 kilometres from the CBD is a great choice, with apartments in the suburb having a median value of $294,586, a decrease of 1.3 per cent over the last quarter.

Jess Lee, Business Manager at Habitat Real Estate, shared her recommendation on the top suburbs for those considering apartments and townhouses.

“Apartments surrounding Fannie Bay, Parap, Larrakeyah, Stuart Park and Nightcliff where you can have pets are in high demand, therefore, if you are not looking at extending the budget to a house, then a townhouse or ground floor unit could be a great option as these will always be extremely popular.” 

Median house values in Palmerston are sitting at $515,634. Ms Lee described the up-and-coming suburb as a great option for investors.

“If you are more inclined towards a house as an investment, Palmerston is booming and is very popular with young families that move up to the NT, with a multitude of facilities at your fingertips,” she said.

Jobs bring demand

Ms Lee said investors considering Darwin should get into the market before the prices go up even further.

“Although we are sometimes known as a boom and bust town, I think that with the projects that are currently on the horizon, with defence, construction, oil and gas, as well as the university, things are looking good for the Territory,” she said.

“We certainly did feel the pain years ago when there was a downtown in the market, however with countless jobs available up here and projects in the making, I think there is a solid offering for people looking to invest.”

Ms Lee believes furnished and equipped properties are a great choice for investors, as these are in high demand due to the substantial number of FIFO and defence workers in Darwin.

“Offering a furnished unit in a great city location only further increases your return,” she said.

“If you are looking to capitalise on investment and returns, the best place you can look to buy is in a unit around the city and surrounding suburbs.

“We have seen huge rental increases around these areas and are continuing to relist rents at higher prices when properties are coming to expiry.”