Darwin's northern suburbs present capital growth opportunities: HTW
Darwin's northern suburbs present the best bet for investors looking future capital growth says Herron Todd White in its June market report.
"The Darwin CBD is dominated by investor owners who are looking to cash in on the high yields, while the northern suburbs are mainly owner-occupiers. So with current renters being driven into purchasing this could lead to capital growth in the northern suburbs where a large percentage of owners are owner-occupiers," says the valuation firm.
HTW also notes that Palmerston, 20 kilometres south east of Darwin, could also see some growth in new sub-divisions such as Durack Heights and Zuccoli "where many investors are putting their money".
"With news of INPEX (the Ichthys LNG Project) and other infrastructure projects in the area forecasting a higher need for housing. the new developments seem to be the first port of call for investors in the area as it offers brand new housing which is going to get the higher rent and require less maintenance.
"As the demand for housing increases and these new suburbs develop, this could lead to an increase in value."
HTW notes that Real Estate Institute of NT (REINT) statistics show that Darwin has been a hotspot for growth over the past 12 to 18 months compared to many other capital cities of Australia which have been slow in recovering from the effects of the GFC.
These figures show that inner Darwin suburbs have seen a 5.4% annual increase (to 31st March 2013) in median house price and 11% increases in median unit price. northern suburbs (Sanderson) 4.1% increase in median house price and 7.4% increase in median unit price, and Palmerston has had an 12.7% in median house price and 11.5% increase in median unit price.
The median house price for inner Darwin now stands at $875,000, the northern suburbs (Sanderson) $572,500 and Palmerston $550,500.
For units, the median price for inner Darwin is $499,500, the northern suburbs (Sanderson) $386,500 and Palmerston $399,000.
HTW notes a shift among homebuyers "due to the affordability challenges of renting in the top end".
"Many of the buyers are those that are fed up with the high rental costs, and are jumping off the rental roundabout into home ownership for similar and in some cases lower cost.
The average two-bedroom unit/townhouse in inner Darwin rents for $552 per week.
"Given that a $500,000 loan at 6% will cost you around $576 per week, it is understandable why this is happening.
HTW predicts that Darwin capital values will remain "relatively stable in the short term" noting that currently prices are "high compared to other state capitals and affordability is becoming a real issue which is underpinned by a severe housing shortage in the region".
"Many are pointing at Darwin as a major city of the future for Australia, with China and much of Asia looking like being economic leaders of the world in the ‘Asian Century’. Darwin is the closest Australian city which could see the region grow sizably due to trade and tourism.
"As an investor buying in the current market, Darwin could be a great option with high returns and indicators suggesting rents could go up even further in the next 12 months if the housing shortage is magnified as a result of the infrastructure projects mentioned above. As a home owner it seems to be a case of looking to purchase just to keep costs down so living in the region remains a viable option.
"However, the news is not all bad for those not yet ready to step into home ownership. A number of CBD towers are under construction and looking to be completed in late 2013 to early 2014 which will release over 200 units and should give some much needed rental relief in the market."
