Median House Price

Median house prices in the Darwin market decreased for the second quarter in a row with the September quarter 2011 median recording $614,063, down 1.6% since the June quarter and down 0.3% for the year-to-date. Sales volumes continue to decline as does the level of finance commitments from first home buyers, with dwelling approvals starting to level out also. Darwin's extended upward cycle appears to be drawing to a close.

Median Unit Price

Median unit prices in the Darwin market have been fluctuating since late 2009 and continue to do so with the September 2011 median recording $399,204, down 4.9% since June 2011 and down 0.8% year-to-date. This market is still in a state of oversupply and new projects are still coming on board yet the take up rate has been enough to keep prices from falling too far although the weakness in prices in this latest quarter could be an indication that pressure is building.

Median Rent

Rental rates in the Darwin market have increased for houses and remained flat for units with the September quarter recording 2 bedroom unit rents at $450 per week, up 0.0%, while 3 bedroom house rents increased 1.8% to $550 per week. Unit rents have increased 2.2% for the year-to-date while house rents have increased 3.7%. Yields are 5.2% for units and 4.6% for houses with vacancy rates at 0.9%, down from 1.3% in the June quarter.

Dwelling Approvals

Dwelling approvals for Darwin have dropped into a holding pattern after rising steadily since January 2011. Monthly approvals are still increasing albeit by very small increments with the September monthly reading at 95 and the September quarter at 282 (up 15.0% on the June quarter). New land releases have slowed and new product is taking time to come to market which is dampening buyer enthusiasm. The cost of new housing is also a deterrent.

Unemployment

Darwin's unemployment rate has recorded 3.9% for the third month in a row after rising from a low of 2.4% in January 2011. Much of this growth can be attributed to the delays in commencement of a number of major projects in the region and to workers being drawn away from the state by mining opportunities in Western Australia and Queensland. Despite the rise, the rate is still low in comparison to other states.

Population/ Migration

As at June 2010, the Darwin Statistical Division had a population growth of 2.10%, the second highest in the country behind Perth(2.26%). Migration in the quarter to March 2011 saw overseas migration increase 218.2% from –115 to 138, natural increase grow by 2.7% from 662 to 680 and interstate migration decrease by 25.4% from –859 to –1,078. Reductions in job opportunities are contributing to interstate migration.

Investor/ Buyer Activity (nationwide)

Investor activity nationally increased overall during the September 2011 quarter, rising from 36.2% in June to 36.7% in September. First time buyer activity increased from 12.9% to 15.7% over the period. While investor activity has picked up in some states it is still fairly subdued in comparison to first home buyer activity although the latter can be attributed largely as a result of increases in government subsidies.

Capital City Comparison

Darwin’s median house price has decreased by 0.3% for the year to September 2011, while unit prices decreased 0.8%. This compares to Sydney(-5.1% and 1.7%), Melbourne(-2.8% and –0.4%), Adelaide(-3.7% and –3.3%), Canberra(-3.6% and 2.4%), Brisbane(- 5.4% and -2.6%), Hobart(-1.7% and –5.0%), and Perth (-5.2% and –4.6%).

MAJOR PROJECTS

Controversial Projects

The Northern Territory housing market has long suffered from a lack of available and often affordable land which in many cases has placed an artificially inflated price on land values. Supply is kept tight and in a lot of cases this is due to the topography of the area and the difficulty in providing services to new estates. It is an on-going problem in an area with plenty of land, but few areas that can economically be developed.

Detention Centre

Wickham Point, 35 kilometres south east of Darwin, is to be the location for the new 1500 bed immigration detention centre. The centre, due to be completed in December, is budgeted at $9.2 million and will house single men only. The centre was designed to replace the planned $185 million centre at the 11-mile Antenna Farm outside Darwin and once complete will increase Darwin’s immigration holding ability to 2,900 persons. Talk that the centre would ultimately house workers for the impending $23 billion Inpex project have been denied by the Inpex project partners.

Prison

The rural area of Holtze on the outskirts of Darwin is the intended location for the new prison which the Territory Government has said it will not abandon despite the high public opposition. The jail is expected to cost $300 million of which $27 million has already been set aside for headworks. The facility is designed to house 800 inmates and includes all associated accommodation and industries infrastructure. There will be a 36 bed Mental Health and Behavioural Management facility included in the construction as well as a 50 bed Supported Accommodation Programme Centre, dog squad facilities and a horticultural training facility. The project is expected to “deliver” 1,000 jobs and will be built through a Public PrivatePartnership (PPP).

SUMMARY

The heat in the Darwin market that has been driving asset growth for the last few years looks tobe cooling with the second consecutive quarter of declining house prices, increasing unemployment and a slowing dwelling approval and finance commitment pattern. Combine this with economic uncertainty and the ever-present problem of affordability and it’s possible the Darwin market will either continue to decline for the next few quarters or at best, level out. The Territory has been losing population to the other states due to delayed project initiatives although this may turn around in the near future as the Inpex gas project in particular moves towards commencement. Other projects such as the new prison and detention centre are also creating optimism in the employment market. That said however, prices are still high and consumer activity has slowed which will place downward pressure on house prices as buyers become more selective and budget conscious. The unit market is still over-supplied and discounting is occurring, particularly on new projects.