This article first appeared in Your Investment Property Magazine - 2018 November Market Report.

The decline is slowing down in the NT, but values are still on a downward spiral.

CoreLogic’s Total Returns Index for July 2018 showed that the total returns for Darwin fell from 2.5% in the 12 months to July 2018 to just -0.8%. However, the report indicates that, even with this drop, the decrease in values was less sharp over the previous two months.

Regional pockets of the NT recorded much more positive results, with total annual returns jumping from 1.4% to 12.3%. This ties in with rental yields being highlighted as one of the state’s best advantages.

However, while returns favour landlords, rental rates do not. CoreLogic’s Home Value Index showed that Darwin had one of the weakest rental markets among the capital cities, alongside Sydney. Over the 12 months to July 2018, rents fell by 2.2% in Darwin.

“With rental conditions generally remaining subdued nationally, the recovery in rental yields is likely to be drawn out,” says Tim Lawless, CoreLogic’s head of research.

He also highlights Darwin’s poor performance over the past several years as one of the factors that has contributed to the nationwide slowdown in property prices. CoreLogic’s Property Pulse report for August 2018 indicated that Darwin has had one of the weakest decades among the capital cities. Since March 2013, real dwelling values have fallen by a total of 29%.

“We can’t see any factors that may halt or reverse the housing markets’ trajectory of subtle declines over the second half of 2018,” Lawless concludes.

Economic stagnation

That Darwin’s property market still doesn’t seem to have hit the bottom spotlights a problem with the local economy.

“Unless there are real job creators out there – major projects – that market will continue to slide,” warns Real Estate Institute of Australia president Malcolm Gunning.

“It’s all underpinned by jobs – it’s not necessarily a destination for retirees. It’s driven by any increase in population, which is driven by work opportunities.”

Nonetheless, Darwin is still recording fairly steady sales of houses in the $1m range. While lower than the peak figure of 5.9% of all house sales in 2015, the percentage of houses sold at a minimum of $1m in 2018 was 3.8% – a number that has remained consistent over the 12 months to June 2018.

SUBURB TO WATCH

PARAP: Units dominate in rental market

Located in inner Darwin, the suburb of Parap is clearly mirroring the city’s slump.

Values of both houses and units fell over the 12 months to July 2018 by 1.9% and 8.3%, respectively, continuing the negative trend recorded since 2013. This decline is easing in comparison to previous years, which could be a positive sign.

It seems that units are presenting a better showing than houses – over the year to May 2018, the former recorded higher sales than the latter, at 23 units compared to 14 houses. Moreover, the rental rates for Parap’s apartments increased by 2.3% in this period, for a high average yield of 6.9% – a favourable outcome for investors.

Yield: Units offer very high returns of almost 7%, compared to houses at 4.6%

Sales: A total of 14 houses and 23 units were sold in the year to May 2018

This article first appeared in Your Investment Property Magazine - 2018 November Market Report.