Northern Territory Property Report April 2017

Transcription

1 Northern Territory Property Report

2 National Overview Across Australia, the property market has been proving that there is no such thing as a single national housing market. In some states, prices are climbing rapidly; in others, the growth is slower or even stalling. The challenge for beginner investors and rentvestors, who may have limited funds to invest, is to identify those suburbs that are affordable yet have good long-term growth prospects and plenty of tenant appeal. This quarter, we aim to pinpoint those locations. WHAT IS A RENTVESTOR? A rentvestor is someone who purchases a rental property as an investment while renting another property in which to live. The challenge of affordability has caused a rise in the number of rentvestors to 3% of first home buyers nationally, according to industry research. Additionally, many a would-be first home buyer has switched from planning to be an owner-occupier to taking the first step on the property ladder as an investor. The research found that 13% of first home-buyers nationally are opting out of buying an owner-occupied home, and instead choosing to purchase an investment property while living in the family home. This figure rises to 24% in New South Wales and 20% in Victoria home to Australia s most expensive state capitals....research found that 13% of first home-buyers nationally are opting out of buying an owner-occupied home, and instead choosing to purchase an investment property while living in the family home. Other investors may be tapping into their home equity for the first time in order to become a landlord. Whatever the case, the common thread is the need to buy in an affordable location with decent capital growth prospects. And infrastructure often holds the key. PROXIMITY TO TRANSPORT IS ESSENTIAL In Sydney, our most expensive housing market, the south-west growth corridor offers affordable house and land packages that allow investors to maximise depreciation claims on newly built dwellings. This region is the beneficiary of major infrastructure projects that are reducing travel times to the CBD and creating employment opportunities. In Melbourne, pockets of value exist for investors and rentvestors willing to look beyond the city centre. Noble Park is one such suburb, close to all the services and amenities of Dandenong and well served by two train stations. 2

3 In Adelaide, the outer suburb of Seaford is an affordable alternative to neighbouring suburbs, and it ticks all the boxes for local retail outlets, an electrified rail link to the city and proximity to the beach. LOOK FOR TENANT APPEAL Hobart has been a quiet achiever recently, enjoying one of the fastest rates of capital growth across Australia. With tight vacancy rates, a controlled housing supply pipeline and the benefit of a flourishing tourism industry, suburbs worth a look include South Hobart, Moonah and Warrane, where the ripple effect of rising prices in nearby postcodes will propel values upwards. In Western Australia, locations within 10 kilometres of the Perth CBD offer potential for long-term investors. In particular, Fremantle offers the benefit of waterfront living, while Cockburn Central features excellent shopping and employment opportunities that appeal to tenants and will help to support long-term price appreciation. In Darwin, prices have cooled over recent months, but the city has longterm growth potential thanks to continued defence activity and the investment commitment of Chinese company Landbridge. In Queensland, as Brisbane spreads outwards, Ipswich offers some of the city s lowest price points, with a median house price of $250,000. Along with affordability, investors and rentvestors can enjoy the tenant appeal of proximity to public infrastructure and transport, and high rental yields of 5-6%. I invite you to read this report to discover where the best opportunities lie for investors and rentvestors around the nation. Brendon Hulcombe CEO - HERRON TODD WHITE 3

4 Northern Territory DARWIN The Northern Territory s residential property market has come off the boil in recent months. Figures from CoreLogic show property values have dropped in Darwin by 6% over the last quarter, and by 5.3% over the 12 months to the end of February As a result, Darwin s median dwelling value is now $499,500, down from $550,000 at the end of November 2016, when values started to cool. Darwin s median house price is currently $530,000 and the median apartment value is $402,500. Significant supply, a reduction in rents and an easing in vacancy rates have all contributed to weaker demand. The Territory market has also historically been counter-cyclical to Sydney and Melbourne, and when these markets are hot, as they are at present, interstate investors tend to overlook the Territory. Nonetheless, the reduction in Darwin s median values does present opportunities for investors and rentvestors. Yields falling though still robust To date, long-term investors in the Northern Territory have enjoyed yields of 5%, and for some time this return has outstripped many other property markets nationally. While houses are currently yielding 5%, apartment yields have slipped, down to 3.9%. It is worth noting these yields continue to be favourable relative to many other state capitals. The Territory market has also historically been counter-cyclical to Sydney and Melbourne, and when these markets are hot, as they are at present, interstate investors tend to overlook the Territory. With the construction phase of the Ichthys Inpex LNG Project expected to reach completion in about 2019, the property market in Darwin is likely to experience a further softening of rental demand. This event is commonly referred to around Darwin as the Inpex Cliff, and it is something investors should be aware of as a possible short-term downside. Apartments favoured by investors In the Darwin CBD, investors have traditionally favoured apartments over houses. New land releases in Palmerston including the recently established suburbs of Zuccoli, Johnston and Bellamack offer a mix of housing and apartments, but there, too, investors tend to focus on apartments. Economic stimulus will support longer-term values Darwin needs another large infrastructure project to boost population growth, and in the absence of any such project, the property market will remain relatively weak for several years. 4

5 However, the picture is not all bad. Defence activity in the area will continue to provide underlying support, and Chinese company Landbridge, which won the bid to operate the Port of Darwin under a 99- year lease deal worth $506 million, has committed to investing in the city. Such an investment came in February 2017 when Landbridge won a tender to develop a luxury hotel on Darwin s waterfront, a project that will incorporate further waterfront development and an increase in the cruise ship terminal. All of this will be positive for tourism. These developments are expected to give Darwin valuable economic impetus following completion of the Inpex plant, and this will likely flow on to the local property market. ALICE SPRINGS The Alice Springs market experienced a number of buoyant years up to 2011, when it entered into an extended period of correction. Recent indications are that the market has now bottomed. There are limited opportunities for long-term capital growth, but rent returns remain strong, with gross yields of more than 6%. Alice Springs is an important regional service centre for more than 200 remote communities, and its economy is driven by health and other government services, transport, tourism, and the Pine Gap joint defence facility. Investors and rentvesters can gain entry to the market at relatively low prices and achieve solid rental returns with some possibility of longerterm capital growth. These types of investments can be found in the suburbs of Sadadeen, Larapinta and Gillen. The properties most severely impacted by the market correction were 1980s 2-bedroom townhouses, which declined in value by up to 30% and experienced a long period of very low sales volumes. In recent months, sales of these townhouses have picked up, indicating that this segment of the market may have reached its bottom and confidence has returned. 5

6 Local expertise. National strength. Trusted solutions. Herron Todd White is Australia s leading property valuatiuon and advisory group. For more than 45 years, we ve given our customers peace of mind and the confidence to make good-decisions for their vital property investments. Whether you are buying or selling, expert independent advice is the smartest property investment you can make. Liability limited by a scheme approved under Professional Standards Legislation. The scheme does not apply within Tasmania. Telephone admin@htw.com.au htw.com.au