Darwin may have the smallest population of Australia’s state and territory capitals, but its property market has performed the best since the turn of the century.
Australia’s 16th-largest city has a population of just over 140,000. It has an eclectic demographic mix of hard-working, high-income earners and laid-back lifestyle-seekers. The average household age of 33 is one of the lowest in the country, well below the national average of 37.
Household incomes are a whopping 46 per cent higher than the national average; this is a significant reason why median property values have increased by an average of 9.7 per cent per annum since the turn of the century (the combined capital city average was 8.5 per cent). Driven largely by an infrastructure-powered gas boom, double-digit price growth was experienced in seven of the eight years from 2003 to 2010, inclusive.
Building costs are higher in Darwin because of the additional engineering so that properties can withstand tropical storms and cyclones.
As at the 2011 census, 21.6 per cent of greater Darwin’s 63,000-strong workforce had jobs in the public administration and safety sector (various government departments, including the Defence Force), while 5.5 per cent of the workforce was in transporting and warehousing (compared to the 4.8 per cent national average).
A segment of Darwin’s population is made up of people who have relocated from other parts of Australia for high-paying jobs on major infrastructure projects. In 2012, Japanese-owned INPEX commenced its $34 billion Ichthys LNG project to extract natural gas from the oceanic Browse Basin off the Western Australian coast. The gas will be processed at a large LNG plant at Bladin Point in Darwin harbour. It has been forecast that INPEX will spend US$8 billion with NT businesses during the four-year construction phase.
A 3,500-bed workers’ village provides temporary accommodation to a portion of this project’s workforce. At peak construction in 2014, the project employed around 8,000 people in Darwin. However, reports suggest that this will fall to a mere 300 once the project reaches its 40-year operation phase in late 2016.
Population data shows people leaving the state, likely as a result of the completion of their employment contracts, and there’s not much on the horizon to suggest a reversal of this trend in the short term.
In November 2015, a $1.3 billion contract was signed to construct a 620 kilometre gas pipeline from Tennant Creek to Mount Isa, creating up to 900 jobs during peak construction. A marine industrial park at East Arm is also proposed.
During 2014, when Darwin’s property market was quite strong, Propertyology commented that building approval volumes were at a concerning level for property investors. The NT government also announced that it had released big parcels of land for residential development, with the intention of driving prices down. To support this strategy, they have also offered a $26,000 first home owner grant and new house-and-land packages, commencing January 2015. Building approval volumes continue to be higher than normal at a time when population trends on economic development projects have been easing.
Compared to other parts of Australia, a high proportion of Darwin residents favour apartment living. This is thought to be partly a reflection of the temporary-residency mindset of many who have relocated to Darwin on high-income employment contracts.
Territorians will have their fingers crossed that something tangible comes from the federal government’s $5 billion infrastructure fund for economic development in northern Australia. Opportunities in the territory are plentiful in agriculture, tourism, clean energy (gas and uranium) and the Defence Force. Alice Springs and Katherine are locations on Propertyology’s radar.
While Darwin’s top-end location will always lend itself to additional Asia-related projects, for the moment, the cupboard is almost bare. For eight consecutive years through to 2014, greater Darwin’s population increased by between 8,500 and 9,200 per annum, whereas this eased considerably to 6,700 in 2015.
As forecast by Propertyology in previous reports, Darwin’s property values and rents eased during 2015. With residential supply still high and very little on the horizon for economic development (a precursor for housing demand), it’s difficult to see when the worm is likely to turn.
Simon Pressley is Managing Director of Propertyology. Having being awarded Australia’s buyer’s agent of the year on three consecutive occasions, Simon is a REIA Hall Of Fame Inductee. Propertyology’s core business involves full-time analyses of property markets all over Australia. Working exclusively for property investors, their service involves buying properties in strategically chosen locations all over Australia.