Northern Territory Property Report
National Overview This quarter we look around the nation to identify affordable properties with the potential to deliver healthy long term gains suitable for first home buyers and also investors. If there is one word that could sum up the key driver for growth, it would have to be infrastructure. New road / rail links are bringing affordable outer suburbs closer to city centres and employment hubs. New hospitals or tourism precincts are creating jobs. These are valuable factors that will underpin long term capital gains. ALL ABOARD NEW RAIL LINKS LET SUBURBS REACH FULL POTENTIAL The inner Sydney property market looks set to be transformed by a number of new light rail systems. Key areas to benefit include the inner west s Dulwich Hill and Kingsford in the east. For investors with a speculative leaning, suburbs with proximity to Brisbane s proposed Underground Bus and Train (UBAT) link could offer long term capital growth. The construction of South West Rail Link is likely to underpin growth in the first home buyer belt of Sydney s south west, with suburbs like Elizabeth Hills, Gregory Hills and Oran Park well placed to reap the rewards. For investors with a speculative leaning, suburbs with proximity to Brisbane s proposed Underground Bus and Train (UBAT) link could offer long term capital growth. The connection is earmarked to run from Dutton Park in the south to Victoria Park in the north, though it s worth stressing the project is only a proposal at this stage. ROAD LINKS BRING OUTER SUBURBS CLOSER IN The duplication of Adelaide s Southern Express Way due for completion in mid-2014, will vastly improve commuter access to Adelaide s south. Suburbs like Seaford, Seaford Rise and Port Noarlunga South all offer significant lifestyle benefits and the new road link should bring capital growth to the region. NEW COMMUNITY INFRASTRUCTURE CREATES OPPORTUNITIES Melbourne s Broadmeadows is a classic example of an uncut gem for investors. House prices start at the low $350,000s, yet the suburb is located just 16 kilometres north of the CBD. A major investment in community facilities is expected to enhance the area s appeal. 2
For investors with a five year timeframe, the additional employment generated by the Queensland s Sunshine Coast University Hospital (due for completion in 2016) should support property values from Caloundra to Maroochydore. CONSIDER NEIGHBOURING AREAS Faced with affordability challenges, it can pay to look at areas where neighbouring suburbs have experienced strong price growth. This is especially true in the Perth suburbs of Parkwood and Lynwood, which remain priced below $500,000 while adjacent suburbs are commanding price tags in excess of $650,000. When suburbs share the same infrastructure facilities, notably transport links, there s a good chance that price growth will ripple outwards. A FINANCIAL HELPING HAND In a number of locations, first home buyers are being encouraged to consider new builds with the enticement of additional state government support. This is especially the case in Tasmania where the recently inflated First Home Builder is seeing buyer interest grow in suburbs along Hobart s eastern shore in particular Old Beach, Howrah, Tranmere and Oakdowns. Brendon Hulcombe CEO - HERRON TODD WHITE 3
Northern Territory The top end s capital Darwin, shows little sign of slowdown in growth, and the construction of the Inpex Gas plant at Blaydin Point has provided a major drawcard for investors. This has made it more challenging for first home buyers to secure affordable properties although elsewhere in the Territory, locations such as Katherine offer good value. Darwin Strong ongoing demand from investors has continued to push up Darwin prices. The challenge for first home buyers has been exacerbated by reductions in first home owner grants and stamp duty concessions. The entry price point for established properties is now around $450,000. Indeed investors have dominated the Darwin CBD market, which currently has over 800 apartments under construction. OPPORTUNITIES FOR INVESTORS It s fair to say that investors left no stone unturned in the Darwin market in 2013, and the combination of historically low interest rates and strong rental returns could see this continue into 2014. Vacancy rates in 2013 were around 3.3% for both houses and units in the greater Darwin area. Rental growth was substantial, and the current average weekly rental of $671 for a 3-bedroom house reflects a 12.4% annual increase for a current yield of around 5.8%. Rents on 2-bedroom units average around $487 per week, reflecting a 5.2% annual increase and a yield in the order of 5.4%. With the construction of the Inpex Gas project well underway, the investor market has been flooded with local and interstate investors, seeking strong rental gains. Indeed investors have dominated the Darwin CBD market, which currently has over 800 apartments under construction. The newer sub-divisions of Palmerston, with new dwellings on smaller than average allotments (350 square metres to 550 square metres) will also provide steady returns for investors, however the long term capital growth on these projects is likely to be limited. Investors seeking longer term capital growth have been prepared to forgo some strength in rental returns by purchasing older dwellings on larger blocks of land. The Territory has quite rigid zoning laws in regards to 4
redeveloping existing residential dwellings, nonetheless savvy investor are looking to larger allotments with good access to transport, schooling and local amenities. The prevailing view is that over the longer term significant gains may be available by sub-dividing these properties providing development regulations are relaxed in the future. KATHERINE Katherine offers plenty of scope for first home owners with 1-bedroom units priced from around $150,000. The more popular option among first home owners has been 2-bedroom units and townhouses with prices starting from about $220,000. The rental market in Katherine is very tight and the lack of stock and increasing rents has pushed some renters towards a home purchase. Though the older sections of Katherine offer cheaper homes for first home owners, these areas are located in the flood zone, which poses a higher risk and will limit future capital growth. INVESTORS All sections of the Katherine market have been heavily dominated by investors. Vacancy rates are extremely low and agents often report having no available properties to let. Upcoming vacancies are often pre-let weeks prior to the incumbent tenant vacating the property. Katherine offers plenty of scope for first home owners with 1-bedroom units priced from around $150,000. Katherine East has been the most popular location for investors, and it is certainly the pick of the area as it s located out of the flood zone and the dwellings are newer, therefore offering investors greater opportunities to claim depreciation deductions. Entry level 3-bedroom dwellings start at $360,000. Katherine East is certainly the best long term growth prospect in Katherine, and values are likely to be underpinned by protection from flooding. The last serious flood experienced in 2001, caused massive damage and wiped out many of the town s dwellings. 5
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