Over half of the Northern Territory’s residents call Darwin home and although it’s population may be low compared to Australia’s major cities, it surely has a big heart.
Darwin is a tight-knit community which cultures a thriving tourism industry, and there are no surprises there, Darwin is the postcard definition of wild Australia. Its famous shoreline is home to night markets and the city itself is an entrance to Kakadu National Park - home to crocodiles, birds, wetlands and waterfalls.
Darwin is surely Australia’s wildcard, and when it comes to its property market it is definitely no different. The Top End, as the locals call it, is affected by a number of factors that determine the performance of the local market - often independently of nationwide trends.
For starters, it’s the gateway to Asia, and Darwin has a large part to play in imports and exports, including the territory's mineral commodities supported by its mining industry. Darwin airport is also a common stopover and is a short flight to international trade centres such as Singapore and Hong Kong.
Darwin is a popular destination for business people en route to Asia, and is also a hotspot for backpackers and mining workers, which results in a particularly transient population.
These factors, combined with Darwin’s extreme seasonal variation has a large impact on its small local market, which causes volatility as turbulent as the city’s wet season.
What did the property market in Darwin look like in 2018?
Australia’s property market experienced a tough year all round in 2018, with very few exceptions. There are many reasons to blame for the slide in property prices, a few notable factors include:
- The tightening of lending measures by the banks, particularly for interest-only loans.
- A large decrease in interest from foreign investment.
- A drop in consumer confidence due to the lowest clearance rates recorded in the last 20 years.
- An oversupply of units in many of the country’s states.
Darwin definitely didn’t make it out unscathed and took one of the hardest hits in 2018. According to statistics within QBE’s Australian Housing Outlook, house prices were down -7.4%, second only to Sydney’s -7.6%. The decline was even harder on units, which took a staggering -18.7% loss due to a large oversupply.
Despite this, unlike most of the rest of the country, Darwin’s property prices were already declining in the years before, and between June 2014 and September 2017, median house prices dropped a whopping -20%, or $126,000.
"According to... QBE's Australian Housing Outlook, house prices were down -7.4%, second only to Sydney's -7.6%."
During this period supply overgrew demand, leading to high vacancy rates. Despite Darwin generally having strong rental yields, rent prices dropped -19% below their 2015 peak, and this, combined with falling house prices and tighter lending conditions, caused a collapse in investor interest.
The downturn was particularly felt in inner Darwin, which saw a -12.5% drop in property value, spearheaded by the fact that this area contains a high concentration of units.
Despite the doom and gloom, the market readjustment, combined with first home buyer programs and stamp duty concessions have encouraged first home buyers into the market. During the 2017 to 2018 period first home, buyer lending jumped up 64%.
Darwin property market forecast 2019
Listing rates in Darwin are still on an upward trend, creating an oversaturation in the supply market. The Northern Territory Department of Treasury and Finance has indicated that the NT economy will be in recession for much of 2019. This will, however, see fair value quickly return to the housing market after many years of being overpriced beyond demand.
Despite the oversupply, the market is expected to recover by the end of the 2019 to 2021 period, which will see a cumulative 6.0% growth as the Darwin median house price reaches $530,000.
Some major factors that will determine the performance of Darwin’s property market in 2019 include:
- The commencement of new projects drastically declining, as prices and demand have dropped. The period of 2017- 2018 saw house commencements fall -44% and unit commencements -75% lower than the 2014 - 2015 period. Supply is expected to continue to drop over the next year.
- Population growth expected to recover due to migration, which will contribute to the oversupply being absorbed by the market.
- As Darwin is a major export centre, the US economy has a large role to play in setting growth and economic sentiment. A looming trade war with China could be problematic, affecting Darwin’s population of transient business people.
- Low commodity prices negativley affecting Northern Territory’s mining industry, with iron ore and manganese having been hit the hardest. However, this is predicted to turn around, potentially bringing many transient workers to Darwin.
If things go Darwin’s way, it looks like it’s economy is due to improve by 2020, which should see a lot of value in both the housing and unit markets.
How are Darwin house prices expected to change in 2019?
Property experts have differing opinions on Darwin’s property market, however, there is a general consensus that units prices will continue to plummet throughout 2019, while house prices may experience small amounts of growth throughout the end of 2019 and beyond.
QBE’s Australian Housing Outlook predicts that Darwin’s detached property market will experience growth of 1% in 2019 bringing the median house price to $505,000.
Things look optimistic in the years following, as QBE believes houses will experience a 6% growth between 2019 and 2021, putting Darwin leagues ahead of Sydney and Melbourne, which are both set to continue to experience cooling over this period.
"Things look optimistic in the years following, as QBE believes houses will experience a 6% growth between 2019 and 2021..."
As stated, units are a bit of a different story when it comes to Darwin. Units are forecast to continue to drop -8.4% over the next year, with median unit prices falling to a ten year low of $350,000.
However, there may be good news on the horizon, as QBE believes growth will gradually increase by 1.4% in 2020 and 2.8% in 2021, which means 2019 could be the perfect year to pick up a bargain.
Louis Christopher's Housing Boom and Bust report predicts that Darwin’s combined property prices will continue to drop throughout 2019, a figure that is mostly dependent on the expected poor performance of units during the next year. Christopher predicts:
- A -8% to -4% decrease if cash rates remain unchanged, the economy continues to slow and a Labor government is elected in May.
- A -8% to -4% decrease if interest rates rise 0.20%, cash rates remain unchanged and a Labor government is elected in May
- A -8% to -4% decrease if a -0.50% rate cut is passed, starting in the 2nd quarter, the AUD remains between $0.65 and $0.75 USD and a Labor government is elected in May.
- A -8% to -4% decrease if the Liberal government remains.
Christopher’s forecast shows that he believes Darwin’s property prices will decline independent of situations that may affect markets in the rest of the country, a phenomenon not unusual in Australia’s Top End.
Is unit oversupply an issue in Darwin?
Over the last few years, Darwin’s unit market has been primarily propped-up by investors supplying dwellings to transitory workers. However, unit demand has dropped significantly due to a large oversupply.
Early demand from keen investors resulted in a huge increase in developments, however, with mining activity decreasing and low commodity prices leading to fewer workers in the city, rental demand has fallen significantly.
"In the four years up to March 2018, the median unit price fell to $347,500 - a huge drop of -34%."
In the four years up to March 2018, the median unit price fell to $347,500 - a huge drop of -34%. However, new unit commencements have plummeted in the last couple of years, and the market will find equilibrium as the new stock begins to be absorbed by the market in 2020.
Best suburbs to invest in Darwin
With Darwin’s housing market set to experience growth, now may be the time to consider investing. Those with a bit of patience may benefit greatly from Darwin’s oversupply of apartments, which will experience growth in 2020 after another year of decline, which should eventuate in bargain prices.
But which suburbs are best geared to make the most of Darwin's property bounce back?
According to SQM Research, the best places to watch are Darwin’s southern perimeter suburbs, which may hold their value better throughout 2019. These suburbs include:
These suburbs may be able to buck the trends of suburbs closer to the CBD. Palmerston for example, showed particular resilience during 2018, declining only -7.6% where Inner Darwin fell -12.5%.
As the market starts to turn around at the end of the year, buyers will likely flood back to take advantage of low prices. The Top End may see more activity and positive returns in northern suburbs such as:
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