Darwin Defence Housing rental yields of 6 percent attractive for investors

Darwin Defence Housing rental yields of 6 percent attractive for investors
Darwin Defence Housing rental yields of 6 percent attractive for investors

This inner Darwin city belt is popular with both owner-occupiers and renters alike, being ideally positioned close to shopping facilities and the Darwin CBD, according to valuation firm Herron Todd White.

Dwellings of this type in this segment start from $700,000 and generally have large allotment sizes starting from 800 square metres.

Substantial land values are the main value component in this area, HTW noted.

Most of these dwellings were constructed in the 1960s, which is noted for Darwin’s rebuild and subsequent expansion in a post-World War 2 era. This type of property is distinguished by being
built on stilts (masonry or metal), cross-ventilation 
cooling, banks of louvred windows and usually a large balcony.

Tropical living is a desired aspect of the living in the Territory and elevated properties facilitate this quite effectively, the report noted.

"When mentioning classic dwellings in Darwin, we have to include the large scale ex-government housing from the late 1970s and early 1980s which are predominantly found in the northern suburbs.

"This type of dwelling is generally a detached, ground level, 3-bedroom, 1-bathroom dwelling of brick construction or an elevated, 3-bedroom, 1-bathroom metal clad dwelling on an 800 square metre block.

"They make up a significant proportion of the second hand stock which is majority owner-occupied.

"On average, an ex-Government house in this area will range from the low $400,000s to mid $500,000s depending on renovations."

Inner city locations closer to the CBD and the CBD itself have seen a significant change over the years following Cyclone Tracy, mainly in terms of higher density living.

Driven by the booming Darwin economy on the back of large gas projects, 2006 brought with it a substantial increase in units and townhouses offering a lower price point for those trying to enter the property market.

A 2-bedroom, 1-bathroom attached unit in this area can range from $250,000 to $300,000 and a 3-bedroom unit from as low as $300,000. Currently this segment is experiencing a noticeable downturn, with a large over-supply for inner city units on the back of substantial unit construction in 2012 to 2014 flooding the market.

HTW noted investors have some reason to remain positive, with rental yields remaining relatively stable at 4% for units and 4.7% for dwellings.

Changes outside the inner city area can be identified predominantly in the newer master planned subdivisions of Muirhead, Lyons and further afield in the satellite city of Palmerston.

These newer areas feature rendered dwellings on smaller allotments, with covenants in place to increase the overall amenity and homogeneity of the suburb.

These types of dwellings are considered to have a higher energy efficiency rating, with superior insulation and are comparably cheaper to build than more traditional style dwellings.

The Muirhead development is in its final stages of land release, with 490 square metre allotments currently starting from $295,000.

Recently, a three-bedroom house at 42 Blackburn Street, Muirhead sold for $585,000. The selling agents were Jennifer Wardell and Robert Higgins from LJ Hooker.

 Darwin Defence Housing rental yields of 6 percent attractive for investors

Many of these dwellings are sold with Defence Housing long term leases in place, exhibiting rental yields of approximately 6% and are therefore considered quite attractive for investors.

A four-bedroom house in Muirhead (picture above) sold in July 2016 for $695,000. It had a Defence Housing Australia lease in place with a rent of $470 per week.

The other major land release in the Palmerston region is the suburb of Zuccoli. Allotments can be purchased from $100,000 for 300 square metres and all dwellings built must abide by the covenants set out by the developer. This segment is popular with rst home owners looking to enter the market, taking advantage of government incentives in the form of stamp duty concessions.

New shopping developments including the Gateway Shopping Centre in Palmerston and Coolalinga Shopping Centre provide this area with adequate shopping facilities.

HTW noted the latest land release announced in 2017 is the Northcrest subdivision, located 13 kilometres from the Darwin CBD in what was originally the Berrimah Farm site.

"This new suburb is currently in the civil works phase, with an expected life of the project ranging from 13 to 15 years based on demand.

"Allotments on 405 square metre can be purchased from $225,000, ranging to allotments in the high 700 square metre range for almost $400,000.

"These modern subdivisions are a good example of how the Territory market has moved from a traditional suburb with larger allotments to higher density, homogenous style living." 

Darwin House Yields

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