Spot the property hotspot in Darwin
An insider’s guide to Darwin investment hotspots
In an interview with buyer’s agent Tod Peterson from Peterson’s Property Search, we get a property update for the city of Darwin and discover what gems it has to offer.
What are the biggest trends you’ve noticed with first home buyers and investors in Darwin? What’s your advice to people who are considering making the seachange to Darwin?
The first-time buyers’ grants are pretty much dried up. The state government is only supplying grants to new dwellings, which kick in around next year. For what it’s worth, they’re going to raise the grant by $1,000 so it’s going to go up to $26,000.
They are getting rid of the grant for existing dwellings.
It currently is $12,000 on existing but that is not going to be around for too much longer.
So basically, they are looking at new properties which basically is off the plan or may be suitable during this tough market.
This could be interesting because, a lot of the first-time buyers, initially wanted existing properties because it was cheaper. But if they can now buy off plan, we may see a lot of them take up units because there are quite a number of units in the city. In and around the city, I think there’s about another 800 to be released over the next 6 to 8 months.
I think we are going to see a lot of first-time buyers take these up as well because of the changes to the regulations for the grant.
But the current existing grant is $12,000, however they are getting rid of it. It’s only going to be for non-existing houses. It’s going to go up to $26,000.
Investors can take advantage of low interest rates. There’s still a lot of investors around and we are seeing a lot of interstate investors, we are seeing a lot of expat investors. And we’ve been doing very well.
Some investors like to buy houses, and I’m seeing a lot of houses being taken up in the northern suburbs. You can still buy a three-bedroom, ground-floor house on an 800-square-metre block, which is big compared to other states. And we’ve been buying those around the $570,000 to $590,000 mark.
The big thing to note is the change of the regulation with granny flats. Beforehand, if you had a granny flat, you could only rent it out to a dependent. That’s no longer the case. If you’ve got a granny flat, you can rent it out to anyone you like. So that’s going to create a lot of interest. I think that’s there’s going to be a lot more people interested in taking up those sort of places.
What’s your advice to those considering moving to Darwin?
Research! That’s the most important thing. Just don’t come up here blind. Otherwise, you’re going to get yourself into problems. A lot of people come up here with the intention of maybe buying later on, but the cost of living is expensive and, in a lot of circumstances, too expensive to save a deposit.
So if you were planning on buying a house in a year from now, it’s not really going to happen. You’re going to still be renting. So if you’re going to be moving here, you would want to research before you make a commitment and try and get in. Try and get something rather than getting on this treadmill.
I just hear a lot of heartache stories. You know, people think, “Ah. Let’s go to Darwin. We won’t make a commitment. We’ll just see how it is.” And they’re making a good wage but then the cost of living is really expensive and they just can’t save. And then they’re stuck in this cycle where they are unable to buy anything. And some are here renting for 10-12 years.
Is the cost of living in Darwin cheaper than Sydney and Melbourne, or just other capital cities?
We are paying $1.75 a litre for Diesel. I think unleaded is going to be around $1.60.
Currently water is very expensive and they are intending to increase the rate. Rates are going up by 30%. So just the general cost of living is very expensive. It’s great that we’ve got the railway, which shoots a lot of stuff in, but you’ve also got to take into consideration transportation costs for goods and services,
If you want to come up here, just look at all the options and you’re better off making a decision to buy before you get here. Or, if you can, save the deposit elsewhere before you get here.
What’s your preferred hotspot for investors?
I’ve been buying a lot in the northern suburbs and it just depends on your price point. If you want to buy a house and you don’t want to spend over $600,000. You know, we’ve been buying in areas such as Tiwi, Alawa, Volagi’s been good.
We picked up a nice, three-bedroom, elevated for $595,000. We are getting $680 a week on it now. If you want to get units, Nightcliff in the northern suburbs. Nightcliff and Rapid Creek are good areas to get into. Those areas have shown some good growth.
We’ve seen a 1% rise over the March quarter. The December quarter was 2.4% a year and it’s risen by 5.1%. We’ve still got a lot of steam in the market.
Nightcliff and Rapid Creek are actually quite good. They gave really taken off quite well. They are relatively old areas but some people are getting in and the plot sizes are good there. They’re at least 800-820 square metres. People are getting in and renovating the houses.
Is there anything you wanted to mention with regards to a buyer's budget, in addition to the grants?
It’s cheaper to do a zoning change on an existing suburb as opposed to putting in infrastructure and headwork for a new suburb. So there’s a big saving there.
The fact that the governor allowing you to rent out granny flats to anyone is significant. The fact that even though it’s on a pro rata system, the leniency of changing of zoning from an R1 to an R2, which means more townhouses.
What's going on in the Darwin market for 2016?
Some media publications say that the Darwin property market has lost its shine and investors are turning away. What they haven't said is that the Darwin property market runs in five year cycles and runs in a reverse cycle to that of it's sister cities of Sydney and Melbourne. 2014 was the downturn year that we had to have. Although in saying that, it was more of a plateau than a downward plunge. Surprisingly units gained 5.7% in growth.
While Sydney and Melbourne markets can be in a strong growth period you will always find the Darwin market in a reverse mode. Where did all those buyers go? Well, they were focused on buying in their own back yard. They say the Sydney and Melbourne markets will slow down and soften up in 2016. That's good for Darwin as the market will experience growth by mid year but I can foresee some intuitive investors entering the market by the end of the first quarter.
There were a large number of layoffs with workers by Ichtys LNG, 800 jobs I believe. But that was because we were entering the rainy season and there were also delays waiting for different components to arrive for the LNG project. Ichtys didn't want to pay workers wages for just sitting around doing nothing. Word around town is that new contracts will be taken up the second quarter of the year. Darwin is a small market and is strongly affected by supply and demand. History shows us that demand has always been greater than supply even though you will see a fluctuation in those ratios over the past four years.
Land releases are always promoted, but the truth is there is not enough release to satisfy demand for that particular target group. First home buyers can now receive a $26,000 subsidy for new off plan unit or house and land purchases. Not many have the ability to purchase a new house at $650,000 so are now looking to apartments as their family residence.
CommSec say that the Norther Territory is the second best performing economy in the nation and that's great, but I feel the State Government needs to acknowledge consistent job opportunities and the attraction of a steady increase in population,whether by interstate or overseas people.
On a closing note Darwin is still always great for investment cash flow. We provide the highest returns in the nation. My latest acquisition is a one bedroom unit with harbour views that I purchased for $370,000. We will be receiving a net return of $2.800/month.