Darwin Blog

Key points
& Yields of 8% and prices as much as 50% cheaper than the southern capitals is shielding the Darwin market from interest rate hikes.
& Yield-hungry southern state investors have replaced first home buyers in the entry level market priced between $250,000 - $450,000
& The strength of the Darwin market has helped two members of Raine & Horne Darwin’s sales team, Glenn Grantham and Sanjukta Ghosh, scoring top five finishes among the leading property group’s best agents nationally over the last quarter.

Darwin NT (28 August 2022)

Substantial yields as high as 8% and median property values as much as 50% cheaper than some southern capitals are shielding most of the Darwin property market from the impact of five months of interest rate rises, according to a leading real estate firm, Raine & Horne Darwin.

Mr Grantham, General Manager of Raine & Horne Darwin, said, “The decision by the Reserve Bank to increase the official cash rate by 2.25% since May has impacted the serviceability levels of some entry-level owner-occupiers.

“Specifically, higher interest rates haven’t helped people who were previously qualifying for a mortgage previously by the skin of their teeth, such as low-income earners and first homeowners and people along who now need more considerable deposits to buy a home because of higher interest rates.

According to Mr Grantham, entry-level buyers now need the equivalent of a 30% deposit to buy in the Darwin CBD instead of a 20% deposit.

“The new loan serviceability requirements have forced some entry-level buyers to put their real estate plans on hold,” he said.

“But unlike other Australian capital city markets, higher interest rates haven’t knocked out the rest of the buyers, such as equity-rich upgraders and yield-hungry investors who continue to enjoy the double whammy impact of Darwin’s excellent affordability compared to the southern states and more substantial investment returns.”

Mr Grantham continued, “The upgraders have built up significant equity by being in the market for a period, while those younger high-income earners working in the resources sector have been able to save a substantial deposit because their income levels have increased over the years and, on average can earn a lot more than what their cohorts do down south.

“As much as we’ve lost out on the lower qualifying sector of the market, the bulk of the market still
qualifies for finance.”

Why the sky isn’t falling in on the Darwin market

In the entry-level market between $250,000 and $450,000, yield-hungry southern state investors have simply jumped into the breach left by first-time buyers forced to go back to the savings drawing board by successive interest rate hikes.

“First-time buyers are being replaced by investors that are yield-hungry. Because in Darwin, you can still buy an entry-level apartment for around $250,000 and rent it out for $400 a week,” Mr Grantham said.

“This is a gross yield of 8.32% and is very attractive when you’d be lucky to score a return of 3% in Sydney or Melbourne.

“Moreover, most of our investors are not first timers but savvy buyers looking to improve the returns of their property portfolios with some judicious buys in Darwin where our residential yields are also stronger than returns from some commercial property assets down south.”

Raine & Horne Darwin has listed a two-bedroom entry-level apartment at 2/40 Kurrajong Crescent in the sought-after northern suburb of Nightcliff for $249,000. This apartment will require some upgrades but will easily rent for $400 a week.

“This apartment has attracted offers above expectations from several southern state investors because Darwin’s so affordable. This ongoing demand means there’s been no downturn in the market. It’s continuing to tick over,” Mr Grantham said.

The monthly response to interest rates in Darwin Mr Grantham confirms that following a decision by the RBA to tighten monetary policy, there is a seven-day period where many buyers and vendors ponder the impact of the increase on the
market before returning to their real estate goals.

“What we are seeing is that when the Reserve Bank shifts interest rates by 0.5%, for the next
seven days, it’s like, oh gee, what’s going to happen?

“Then as soon as that seven days is over and buyers realise that the world didn’t fall in on itself and the market is still turning over, and suddenly it goes back to business as usual, and prices appear to be continuing to rise.” According to the latest from CoreLogic, the Darwin market grew by 2.3% in the three months to 31 August compared to a fall of 3.4% recorded by the national marketⁱ.

On a business level, Mr Grantham said, the performance of the Darwin market has contributed to members of his team’s improving sales performance compared to colleagues in the Eastern states.

“Over the last five years, we haven’t had a sales rep in our office in the race to be in Raine & Horne’s top agents for number of sales nationally. Right now, Sanjukta Ghoshⁱⁱ and I, over the last three months, have been in the top five, three times running.”

For all your real estate sales and property management needs in Darwin, and Palmerston or
to find out about the auction process, contact Raine & Horne Darwin on 08 8941 8941.

For further media information contact:
Glenn Grantham, General Manager, Raine & Horne Darwin on 0418 803 222

ⁱ https://www.corelogic.com.au/news-research/news/2022/home-value-index-housing-downturnaccelerates-as-falling-values-become-more-widespread
ⁱⁱ https://www.corelogic.com.au/news-research/news/2022/home-value-index-housing-downturnaccelerates-as-falling-values-become-more-widespread