Most affordable capital, nation’s highest rent yields: the city forgotten by investors
The Top End has fallen out of favour with property investors but guaranteed high rent returns and the prospects of a return to capital growth in 2025 could see Darwin return to favour.
Once a prime investment target for those looking to diversify their property portfolio, Darwin has more recently slipped into relative real estate obscurity.
Yet despite the sluggish capital growth results of the past year, Darwin still boasts the cheapest median housing values in the country coupled with the highest rental yields, and offers investors the closest thing possible to a positive gearing guarantee.
The Darwin property market has continued to inch lower - going backwards by 0.7 per cent over the quarter - after delivering just 2 per cent price growth over the past 12 months, leaving investors to ask if the Northern Territory’s outstanding rental yields (NT regional 7.3 per cent, Darwin 6.8 per cent) are enough to merit their interest.
According to Rob Higgins, Project Planning and Marketing, LJ Hooker, an expected rise in Darwin rents in 2025 will offset any concerns for investors around the lack of capital growth.
“For investors with large deposits or cash purchases, it’s very easy to positively gear properties in our market.
“We are seeing a strong rise in investor purchasers either buying directly or through buyers agents and investor clubs, and almost all of these buyers are from interstate.
“They are telling us that their interest in Darwin stems from the lower entry price point compared to other major cities and with the higher rental returns they have more funds to cover their loan repayments and other costs.
“While capital growth is still important to them it is currently secondary to being able to cover their costs with the rental income,” Mr Higgins said.
From a market perspective, the greater Darwin region covers the cities of Darwin and Palmerston and while they are separate cities with separate councils, they are so close together they have almost merged.
In an as yet unreleased annual market report from Colliers International NT provided exclusively in advance to API Magazine, the authors noted that the housing conditions across Darwin and Palmerston still appear to be more demand driven, with the number of house sales now approaching stable conditions, and with Palmerston actually recording an increase of 22 per cent in comparison to a year ago.
“Palmerston has had a substantial number of new build sales in the recently developed suburbs of Zuccoli and Bellamack and this has boosted the overall median price, so much so that it is now equivalent to the median price of the more generally coveted Sanderson.
“This stability may be a turning point indicator that the median prices have levelled out and prices will begin to rise again in 2025.”
PropTrack revealed Darwin’s high average rents have not increased to any great extent for detached residential, however, there has been movement over the past 12 months for unit stock, more particularly older stock at the lower end of the market that has increased from a lower base, while the mid to upper tiers have been relatively stable.
CoreLogic data indicates Darwin weekly housing rentals have increased by approximately 2 per cent over the past 12 months.
Craig Covacich, General Manager of Realty, Urbex, said Darwin’s affordability coupled with the highest rental yields and a market skewed to renting demand meant it was the “prefect recipe for investors, particularly those from interstate who have enjoyed a healthy boost to their equity held in real estate over the past three years and want to put this gain to good use.”
He argued the local economy, infrastructure improvements, high employment levels, continued high migration, and the prospect of interest rate reductions would all serve to bolster the Darwin real estate market in 2025.
“Each of these components will drive demand, inclusive of the new housing stimulus packages in market.
“It’s also important to note that a good proportion of the employed market prefer to rent as they do not envisage a long term tenure in Darwin, so the tight vacancy rate is unlikely to shift, giving investors rental yield confidence.”
Darwin suburbs’ property performance
| Location | No. Sold | Median Price of Sale | % Change Qtr | % Change Annual |
|---|---|---|---|---|
| Alawa | 6 | $492,500 | -4.6% | -16.8% |
| Anula | 8 | $450,000 | n/a | n/a |
| Bayview | 1 | $990,000 | 14.6% | -16.4% |
| Berrimah | 8 | $621,500 | 61.8% | -3.0% |
| Brinkin | 2 | $1,470,000 | 100.0% | 100.0% |
| Casuarina | 0 | |||
| Coconut Grove | 2 | $652,500 | -1.1% | -4.2% |
| Fannie Bay | 6 | $1,225,000 | 26.5% | -6.5% |
| Jingili | 4 | $515,000 | -47.1% | -13.5% |
| Karama | 8 | $450,000 | 4.4% | 3.3% |
| Larrakeyah | 3 | $1,200,000 | -20.2% | -4.8% |
| Leanyer | 14 | $574,500 | -6.2% | -8.0% |
| Ludmilla | 4 | $752,500 | 27.6% | 24.9% |
| Lyons | 5 | $737,000 | 9.1% | -12.6% |
| Malak | 5 | $480,000 | -2.3% | -12.5% |
| Marrara | 5 | $850,000 | n/a | n/a |
| Millner | 4 | $552,500 | 4.1% | -40.3% |
| Moil | 6 | $450,000 | n/a | n/a |
| Muirhead | 11 | $750,000 | 3.1% | -8.0% |
| Nakara | 5 | $690,000 | 4.7% | 12.9% |
| Nightcliff | 7 | $955,000 | 6.0% | -8.1% |
| Parap | 5 | $740,000 | -62.2% | -2.6% |
| Rapid Creek | 5 | $760,000 | -16.1% | -14.7% |
| Stuart Park | 5 | $830,000 | -9.5% | 16.0% |
| The Gardens | 0 | |||
| The Narrows | 1 | $900,000 | 12.2% | 100.0% |
| Tiwi | 7 | $636,250 | n/a | n/a |
| Wagaman | 8 | $518,750 | -4.1% | -14.7% |
| Wanguri | 6 | $652,500 | 5.0% | 0.4% |
| Winnellie | 0 | |||
| Woolner | 0 | |||
| Wulagi | 10 | $549,500 | 1.0% | -5.0% |
Source: REINT
Another shot in the arm to the local market will be Australia’s most generous housing grant scheme, which has now opened in the Northern Territory. The NT government’s new HomeGrown Territory and Fresh Start New Home programs includes three different grants ranging from $10,000 to $50,000, encompassing both first home buyers and existing home owners.
Designed to help turn around the territory’s net interstate migration deficit, the government says it will also halt a downturn in the local residential construction sector.
Under the scheme, first home buyers can either access a $50,000 grant if they build or buy a new home in the NT, or a $10,000 grant if they purchase an existing property. On the other hand, people who already own property can access a $30,000 grant under the program, but only if they build or buy a new home in the territory. Once the homes are built or bought, owners must live in them for a minimum of 12 months.
Darwin’s property investment hotspots
When it came to identifying the suburbs within Darwin that presented the best investment opportunities, there were areas of agreement and difference between our respective commentators.
Mr Covacich crunched the numbers and concluded Darwin City, Gunn, Fannie Bay, Nightcliff and Zuccoli offered the best prospects.
Five Darwin market segments to watch
| Suburb | Median price | 1-year growth | 10-year average annual growth (%pa) | Vacancy rate | Median rental yield | Upfront costs (20% deposit, no concession) | Monthly repayments (P&I) with 80% LVR |
|---|---|---|---|---|---|---|---|
| Darwin City (unit) | $430,000 | -4.4% | 1.5% | 0.0% | 7.8% | $104,931 | $2,174 |
| Gunn | $490,000 | -6.4% | 2.0% | 0.9% | 6.4% | $121,458 | $2,478 |
| Fannie Bay | $1,135,000 | 7.8% | 3.0% | 2.1% | 4.9% | $283,513 | $5,739 |
| Fannie Bay (unit) | $495,000 | -6.6% | 3.8% | 2.1% | 6.4% | $122,857 | $2,503 |
| Nightcliff | $850,000 | -9.2% | 6.3% | 1.4% | 4.7% | $212,405 | $4,298 |
| Nightcliff (unit) | $375,000 | -4.8% | 7.3% | 1.4% | 7.5% | $90,196 | $1,896 |
| Zuccoli | $565,000 | 10.8% | 0.0% | 0.9% | 6.7% | $141,298 | $2,857 |
Source: Urbex
Darwin City and Gunn were also identified by Mr Higgins, in addition to Durack and units in Palmerston
Darwin City would see a lot of pressure on rents throughout 2025 and beyond, he said, with the main driving factor being the recently completed Charles Darwin University campus in the city centre.
“The uni’ campus expects thousands of international students every year starting from 2025, however, no accommodation has been constructed to support these students so they will end up in the rental market, increasing demand significantly.”
He had a word of warning though.
“Just keep an eye on body corporate fees when doing your assessment as they are much higher in Darwin than what some investors expect, largely due to our higher insurance premiums and general cost of maintenance, repairs and services.”
Apartments in Palmerston units also represented value, he said.
“There are a number of unit complexes in suburbs like Johnston, Rosebery and Bellamack that were built during the last resource boom approximately 10 years ago and are selling for well below replacement value and are still quite modern in terms of finishes and features.
“Due to their favourable amenity the rent achieved by these properties is very impressive considering the low purchase price.”
Purchase prices range from $300,000 to $350,000 with rents of $450 to $500 per week.
Durack, he said, benefited from amenity such as lakes stocked with barramundi and nine holes of the Palmerston golf course, parks and a small commercial precinct.
“Houses in this suburb are at that 20 to 25 years-old range and homes in good condition still achieve very solid rents.
“This suburb is close to the Palmerston CBD and arterial roads to commute into Darwin and will be one of the first suburbs to move up when the market swings.”
His final choice was Gunn, which is next to the Palmerston CBD and would likely continue to gain value over time.
