Darwin motors on yet Raine & Horne calls for caution

The latest statistics from RP Data show that Darwin real estate values grew by more than 7% in the last 12 months.

The result left the Northern Territory capital behind Sydney and Melbourne only in terms of capital growth since September 2013, and in front of Brisbane, Perth, Hobart and Adelaide.

Glenn Grantham, General Manager, Raine & Horne Darwin, cautioned that the settlement of major apartment projects was distorting capital growth results.

“The RP Data figures need to be put in context, with a spate of large apartment projects settling over the past few months,” said Mr Grantham.

“The prices for many of the off-the-plan apartments settled recently were obtained 12, 18, even 36 months ago, and don’t necessarily reflect the current market, especially for established stock.

“There have probably been 200 new apartments settled in the last few months, so the prices of these settlements have influenced the median price in Darwin.”

The glut of new apartments is also affecting the tenancy market, with rents for some apartments in the Darwin CBD down by 10% to 15%, compared to this time last year, according to Mr Grantham.

“Falling rents are particularly affecting interstate investors that have based their buying decisions on strong yields. Lower rents will affect cash flows, forcing some investors to sell out, which is creating a surplus of apartments for sale, which in turn, impacts prices,” said Mr Grantham.

The proliferation of National Rental Affordability Scheme (NRAS) apartments as well as the NT government’s Real Housing for Growth strategy, have also combined to impact yields.

“There are now fifty apartments in Karama, a northern suburb of Darwin, which are available to rent for eligible key workers at 30% below market rate, as a consequence of the NT government’s head-leasing initiative,” said Mr Grantham.

The head-leasing program is part of the government’s Real Housing for Growth strategy which will result in 2,000 new affordable homes being built across the Territory by 2016-17. The Karama apartments are the first to be completed under the head-leasing scheme in Darwin.

“The government has head-leased 50 of the 78 privately-owned units in the complex and will rent them out to key service industry workers like nurses, teachers, apprentices, hospitality staff and young families at 30% below market rates,” said Deputy Chief Minister Peter Chandler.

“This means that a one bedroom unit in the complex is expected to be rented to eligible tenants at around $315 a week and a two-bedroom, two-bathroom unit to range from around $365-$405 a week.”

This arrangement will have ramifications for Darwin’s rental market, according to Mr Grantham.

“Where previously tenants were paying $500 a week, owners have to settle for rents around $365,” he said.

“It will have a reverse ripple effect, with apartments previously enjoying rents of $700, now renting for $500, which will only force more investors to sell up, and will impact real estate values in Darwin.

“The upshot is that we are now operating in an easing sales and leasing market in Darwin, and owners must be realistic about sales and rental expectations.

“Around 10 to 15% of properties for sale in recent times have required price reductions to help them sell,” added Mr Grantham.

For all your sales and property management needs in Darwin and Palmerstone, contact Raine & Horne Darwin on 08 8941 8941.

-ENDS-

For further media information please contact:

Glenn Grantham, General Manager, Raine & Horne Darwin on 0418 803 222

Andrew Harrington, National Communications Manager on 02 9258 5400