Is Darwin's property market cooling?

Darwin is losing its status as the growth leader of capital city Australia.  

The Northern Territory was the runaway leader on rental and price growth last year and the early part of this year. But its markets may be cooling.  

I say that with a degree of caution, because the statistics suggesting a tapering of price growth in Darwin are recent – and it’s often a mistake to make too much of data covering a short time period.  

Cycles are seldom smooth and there are fluctuations from one month to the next; it’s the long-term trend that matters.  

The underlying economic indicators for Darwin and the Northern Territory continue to be exceptional.

The Northern Territory has the second lowest unemployment rate in the nation, the highest economic growth and the strongest annual growth in finance to property investors.  

For the first half of 2013, Darwin has been one of the standout performers in the nation.

Australian Property Monitors records a 10% annual rise in the median house price and a 6% rise in the median house price, but the figures for the June quarter, from both APM and RP Data, suggest a slowdown. APM reports a 2.1% decrease in Darwin’s median house price, while RP Data records a 1.8% drop.  

National valuation firm Herron Todd White appears to agree, writing in its August edition of The Month in Review: “After a busy 12 months, the Darwin property market has stabilised over the past quarter, with median house and unit prices holding steady and the number of sales dropping considerably.”  

That latter factor, a major drop-off in sales volumes, is ominous because a change in the number of sales is usually a forerunner to pricing changes.  

But rents remain very strong.

Darwin has the highest average rents in capital city Australia and they’re still rising, according to Herron Todd White.

The median rent for a three-bedroom house has grown 16% in the past 12 months.  

HTW says: “While things have quietened down slightly, the Darwin market is still a sturdy one. Indictors such as low vacancy rates and a shortage of housing mean that, while prices may have stabilised and might not increase much in the short-term, investors with a long-term view will still be able to do well.”  

The market requiring the most caution is the city unit market. Darwin has had a substantial over-supply in the recent past and may have another in the near future.  

“A number of unit developments in the area will release more than 500 units into the market over the next 12-18 months and could lead to over-supply which could lower rental yields,” HTW says.  

A 26.5% rise in building approvals in the Northern Territory (mostly in Darwin) sounds impressive, but it may contain the seeds of the over-supply to which HTW is referring.  

So it’s time to be a little cautious about Darwin.

It continues to have the highest rental yields in capital city Australia, by a considerable margin, it still has very low vacancies and it will continue to receive a massive boost from the Ichthys gas venture.  

But I’d be waiting for the next big set of numbers to make judgment about the trend in Darwin.  

Terry Ryder is the founder of hotspotting.com.au and you can contact him at ryder@hotspotting.com.au or twitter.com/hotspotting.