Darwin - it's the crown of the Top-End and about as North as you can go while still having access to a good coffee. It's wild at heart but offers all the amenities of capital city living. Darwin is simply a postcard-perfect city, offering tropical beachside living, as well as a gateway to Kakadu National Park.
Investing in Darwin has always come with its own set of risks and rewards - simply put, the city plays by its own rules. Often doing away with national housing market trends, Darwin exists in its own bubble.
The city experiences huge seasonal variety - as residents know too well, with a tropical climate comes tropical weather. Another big factor is the transient population, consisting of tourists, expats and workers from the mining industry. The latter of which have begun leaving the state since the end of several mining projects that were situated close to Darwin.
"Darwin is a boom-bust economy, which makes for a boom and bust housing market. This is not a city for the novice investor..."
According to Louis Christopher, author of SQM's latest report, "Darwin is a boom-bust economy, which makes for a boom and bust housing market. This is not a city for the novice investor and really just ranks above a mining town in terms of risk versus reward."
Not only does the nature of the city already put Darwin in a league of its own for investment prospects, but Christopher also points out that a significant overhand of property stock remains currently listed over 180 days old and represent 65% of the market.
Undoubtedly, this will make it increasingly difficult for the market to recover in the immediate future, as absorbing the stock alone will require a substantial amount of time.
Nevertheless, let's take a look at the latest statistics to paint a picture for 2020.
What did the property market in Darwin look like in 2019?
2019 wasn't an easy year for the property market anywhere in Australia and don't think for a minute that Darwin was an exception. However, while many of Australia's capitals were toppling from a 2017 peak, Darwin has actually been on the decline since 2014. In fact, Darwin's median house price fell 19% between June 2014 and June 2019.
The Northern Territory Treasury Department has explained that "Over the last 25 years, the NT has experienced growth cycles averaging six to seven years where expansionary economic conditions have been experienced. These expansionary cycles have been followed by periods of cyclical contraction. The NT is currently transitioning through a downturn in the economic cycle, which is reflected in declines across a number of key economic indicators."
Here are a few factors to outline Darwin's latest decline:
- Property values have tumbled from an outflow of mining workers following the end of several nearby mining projects, particularly the Ichthys LNG project.
- Following the end of local mining projects, vacancy rates have increased and the economy has troughed.
- There was a slight decrease in the unemployment rate to 4.5% as of March 2019. However, most attribute this to workers leaving rather than jobs growth.
- Dwelling completions in 2018-2019 have fallen by 60% from their peak in 2014.
According to QBE's Australian Housing Outlook, house prices actually didn't shift in Darwin at all in the year to June 2019, remaining stable at $500,000. However, units in Darwin didn't fare so favourably, with a huge fall of -14.9% to $325,000 reported in the same set of statistics. SQM Research's Housing Boom and Bust Report place the combined decline at -9.2% in the 12 months to the 31st of October 2019.
Darwin property market forecast 2020
So what can we expect for next year? Will Darwin's tough times continue or is there a recovery on the horizon? According to QBE's Australian Housing Outlook, there are a few factors which could bolster a favourable return for Darwin's property market:
- Supply of new dwellings is set to continue falling into 2020 below current levels and eventually even below the level of demand for new dwellings.
- Population growth is forecast to slightly increase as a byproduct of interstate migration.
- A combination of lower interest rates and easing of lending measures by APRA are expected to boost investment nationwide next year.
Taking into account these three factors, the oversupply of Darwin properties is ultimately expected to begin absorbing in 2020 and the market is forecast to restore its balance by mid-2021.
"The oversupply of Darwin properties is ultimately expected to begin absorbing in 2020 and the market is forecast to restore its balance by mid-2021."
Read more: National property market forecast 2020
How are Darwin house prices expected to change in 2020?
It looks like Darwin's housing prices will begin to turn around within the next few years, but by how much and when exactly?
Well, according to QBE's Australian Housing Outlook, Darwin is a hotspot for investment, with a forecast of 7% total growth for houses between 2019-2022. This would place the median house price at $505,000 by the end of 2020, and $535,000 by the end of 2022.
Despite this, the market is still volatile and the majority of growth is likely to be felt only within the last year of this period, so serious investors will have to be patient in order to see the real turnaround.
On the other hand, SQM's Report is a lot less optimistic and supplies four scenario-based answers regarding Darwin's housing prices for 2020:
- -5% to -2% if interest rates remain unchanged at 0.75%, the economy recovers, the AUD ranges between US$0.65 - US$0.75 and no APRA intervention until late 2020
- -4% to -1% if the RBA cuts interest rates to 0.5% by April, the US-China trade wars stabilise, the economy stabilises and no APRA intervention.
- -5% to -2% if interest rates remain unchanged at 0.75%, the economy recovers, the AUD ranges between US$0.65-US$0.75 and APRA intervenes in mid-2020.
- -7% to -3% if trade talks collapse, the economy weakens and the RBA cuts interest rates to 0 by the end of 2020.
New figures from Moody's Analytics share a similar sentiment as they forecast Darwin house prices to fall a further -2.4% in 2020 before picking up 4.5% in 2021.
What's the Darwin apartment market like?
When it comes to Darwin's property market, apartments have suffered the most. According to the QBE Housing Outlook report, the median unit price has toppled -38% since peaking in 2014 and a whole 15% within the last year.
As a result, investors and developers have largely backed off from the Darwin property market, with unit completions down -79% from their peak within the last year. By comparison, the completion of free-standing houses have dropped -40% within the same timeframe.
It doesn't sound too good for high-rise living in the Top-End at the moment, but can we expect things to turn around? Well, with the lack of any large job-creating industries, rental demand could remain low. However, median unit prices are currently well below any other capital city, which could make them attractive prospects to speculative investors.
"The Australian Housing Outlook predicts that Darwin's median unit price will climb 9.2% to $355,000 in the 3 years leading up to June 2022."
Given this, the Australian Housing Outlook predicts that Darwin's unit price will climb 9.2% to $355,000 in the three years leading up to June 2022.
Best suburbs to invest in Darwin
Although Darwin has a fairly dynamic market, real estate - especially apartments - can come at a relative bargain. Investors who pick the right areas and have a bit of patience, could soon be reaping some substantial rewards.
According to SQM's Report, some of the best suburbs to invest in Darwin and surrounding Northern Territory are:
- Rosebery, with a median house price of $470,000 and a median rent of $500/week
- Driver, with a median house price of $377,000 and a median rent of $405/week
- Nightcliff, with a median house price of $633,000, a median unit price of $335,000 and a median rent of $540/week and $330/week respectively
- Fannie Bay, with a median unit price of $373,000 and a median rent of $380/week
- Parap, with a median house price of $720,000, a median unit price of $260,000 and a median rent of $650/week and $450/week respectively