The Northern Territory is often seen as the canary in the coalmine when it comes to Australia’s economy.
The NT’s 245,000 people comprise just one per cent of the national population, but the territory’s economic reliance on natural resources, agriculture, and large public sector is a microcosm of Australia’s.
Darwin’s fortunes over the past six months are showing a remarkable resemblance to trends now emerging in the major capital cities like Sydney, Melbourne and Perth, with soaring government debt levels proving no deterrent to the property market.
House prices rose more than four per cent this year, while unit prices have climbed more than seven per cent in the September quarter in Darwin, where 60 per cent of Territorians call home.
September quarter performance:
Houses (Greater Darwin)
- Median Price: $480,000 – an increase on the June Quarter of 0.5% and an annual increase of 4.3%
- Sales volume: up 2.5% for the September Quarter from June and up 10.6% annually.
Units / Townhouses (Greater Darwin)
- Median Price: $300,000 – an increase of 7.1% from the June quarter and up 2.0% annually
- Sales volume: up 34.6% in the September Quarter from June and up 14.4% annually.
While prices are still well off the peak of the market in 2014/15, sales volumes and a low rental vacancy rate point to a significant resurgence.
Real Estate Institute of Northern Territory chief executive Quentin Kilian said the 2020 recovery that was taking place in the face of stifling border closures, was “down to a bit of everything.”
“We have had very lean times for the last four years, which has meant a substantial fall in the median pricing on both houses and units and resulted in substantial stock being available,” Mr Kilian told Australian Property Investor Magazine.
“Lower interest rates, and as such lower mortgage rates, have driven an uptake by first home buyers and we are also seeing the return of investors to the market – both local and southern – who are looking for the lower purchasing prices and high yields.
“Darwin still offers the highest rental yields of any capital city, with 5.1 per cent on houses and 5.9 per cent on units.
“Since July this year we have had more than 140,000 people cross the NT border, with some simply doing their quarantine and moving on, but a sizable number deciding to rent or purchase in Darwin,” he said.
While the property price rises were promising signs of a strengthening market, he dismissed media reports elsewhere that median house prices had risen 6.6 per cent to $539,463.
Business Manager at Habitat Real Estate, Jess Lee, said record low interest rates had seen new clientele trying to break into the property game.
“The recent purchasing trend has predominantly come from locals seeking more space, to fit that home office or extra bedroom in,” Ms Lee said.
“With overseas travel looking to be off the agenda for some time, many buyers have found themselves with some disposable income and are wanting to upsize.
“Furthermore, since the borders opened up, we have also seen an influx of COVID refugees seeking our warmth, less crowded living and lured by the fact we have had no community transmission ever.”
Ms Lee said traditionally interstate families working in the NT would rent a property but with such uncertainty in other states have opted to purchase a property instead, creating competition at open inspections.
Government, grants and growth
The Territory Home Owner Discount allows home buyers who have not had a property in the NT for the previous two years to save up to $18,601 in stamp duty for homes under $650,000.
First-home buyers are also eligible for grants between $2000 and $10,000 for expenses, including household goods and renovations, and all eligible people building in the state can take advantage of the Build Bonus Grant of $20,000.
Given the price limit, it was no surprise it was properties below this amount that were faring best.
Mr Kilian said activity was most pronounced in the $350,000 - $450,000 bracket and the $450,000 - $600,000 bracket.
“Palmerston has shown good activity in the house market and Inner Darwin and north coastal areas around Nightcliff were showing strong unit sales,” he said.
Ms Lee identified inner-city suburbs such as Fannie Bay, Nightcliff Parap, Larrakeyah and Stuart Park as the ones seeing quick sales with plenty of competition among families seeking more space.
The NT Government this week revealed it expects to spend $9.3 billion this financial year, far more than the $6.3 billion it forecasts it will receive in revenue.
Like the rest of the country, COVID has driven huge spending on supporting the community and economy, while hitting tax and other revenues.
Chief Minister Michael Gunner sought to convey a sense of optimism about the Territory's longer-term economic future for “the comeback capital”.
"This is the time to talk up the Territory," he said in his Budget speech, noting the Territory's economy expanded by 4.8 per cent last financial year, largely off the back of LNG exports.
The commercial property market, however, was not showing signs of a comeback.
Business activity and rental property demand slumped in 2018 when construction on the $40 billion Inpex gas plant near Darwin wound down.
Habitat’s Ms Lee said commercial property had continued to struggle and it was not due to COVID.
“This will be another interesting one to watch to see what government initiatives are brought in to assist with our dying CBD commercial properties,” she said.
Rents luring investors
With residential rental yields above 5 per cent, and nearly 6 per cent on apartments, Darwin is again a highly attractive place for investors.
It’s enough to make interstate investors salivate, with other cities around half that rate, including New South Wales’ 3.2 per cent and Melbourne (3.4 per cent, down over a year from 3.7 per cent).
REINT’s Mr Kilian said Darwin’s highly transient population meant there was always rental demand, particularly for nicely presented properties.
“Over the last two months we’ve seen rents starting to increase, many by upwards of $100 per week.
“The September quarter had the median rent of a three-bedroom house at $475 per week, which is up 5.1 per cent from June and 34 per cent more than this time last year, while the median rent for a 2 bedroom unit was $341 per week, which is up 1.6% from June.”
Ms Lee said rental demand was buoyant across the city but identified Nightcliff, Rapid Creek, Fannie Bay and Parap as attracting quality applicants for prices not seen for years.
“We have seen vacancy rates fall from 8 per cent to below 1 per cent within a matter of months.”
“Interestingly, many of these rental applicants are coming from the local market and are pushing for the larger homes despite the increase in rent.
“Palmerston continues to track along as a place younger families are looking to settle due to the infrastructure that has gone out that way.”
Mr Kilian said the recovery certainly was not limited to Darwin.
Alice Springs lifted 72 per cent in volumes of house sales, but retreated slightly (-4.6 per cent) in median price to $450,000, he said.
“Katherine had strong sales, but as it and the Tenant Creek markets are very small the percentage movements can appear quite dramatic, however, there is very little stock available in either town and that is putting pressure on the pricing.”
The newly released NT budget also includes $1.75 billion for infrastructure projects, including $597 million for remote housing.
