What we can learn from Darwin’s property rise and fall?

Do you know which property market was the nation’s strongest for a period during the mid-2000s?

DarwinWhile the title of this blog clearly gives the game away, I bet you’re still surprised that the answer is Darwin.

Yes, the Northern Territory capital was once the envy of the country with its median house price increasing strongly over the period.

Market watchers would know that Darwin’s fortunes have definitely changed from those heady days of sky-high capital growth.

In fact, the latest CoreLogic data shows that its median house price has fallen by 9.7 per cent in the past 12 months.

What happened?

The thing is, back then, Darwin had a lot going for its economy, which stimulated its property market.

For a time, house prices were driven higher and, for a time, everyone was happy.

Then, well, things changed.

Darwin’s market started tanking in a few years ago and hasn’t really stopped.

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Plus, I don’t actually believe better times ahead for Darwin for the foreseeable future.

Well, that’s not entirely true.

You see, Darwin’s property market does tend to jump up and down regularly.

In fact, it’s very similar to a regional area in economic fundamentals.

So, when its economy is not doing well, there are generally not enough moving parts to keep it chugging in the right direction.

This, of course, is the opposite to our largest capital cities such as Sydney, Melbourne and Brisbane, which have large, diverse economies that underpin those property markets in all types of economic conditions.

A case in point is that even though “the market” in Sydney has recorded median house price falls over the past year or two, there are still submarkets which have posted price growth.

Why is that?

Property MarketIt’s all to do with the fundamentals of those areas including being a location that is desirable to aspirational owner occupiers who are prepared to pay to live there.

These types of would-be new residents also generally have the means to access finance regardless of the wider lending environment which sidelined plenty of people until relatively recently.

Of course this means they can bid at auction, for example, and generally they will keep bidding until they secure a home in their dream location.

Hence why property prices have continued to rise in these premium markets over the past few years, while prices for inferior dwellings in substandard locations have fallen.

What I’m trying to say is…

At some point in the future, house prices in Darwin will likely rise again – then they will flat-line for a time, and then they’ll fall.

DarwinThat is the nature of buying in a location that is prone to significant market ups and downs.

Sophisticated investors understand this, which is why they only every buy into strong and stable markets that have a history of outperforming the averages.

They don’t look for the next hot spot or “what’s working now.”

They invest in markets that have multiple pillars supporting their economies plus growing wealth and burgeoning populations.

They don’t fight the big trends and that’s why they only invest in capital cities.

They don’t chase a market that is a bit, well, wild west.

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Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


'What we can learn from Darwin’s property rise and fall?' have 4 comments

    Avatar

    September 14, 2019 mark

    Hi Rob, Interesting article regarding the Darwin market. You have stated the facts about the current market well. However I strongly believe there are facts of recent times which if you dig deep enough prove that the Darwin market will again turn in a positive manner albeit slowly but surely . There is an abundance of riches in the Territory sitting there waiting to be developed. Just read the recent SEAAOC reports to be educated from there conferences. Pick up any edition of The Territory Q magazine edited by the very passionate Anya Lorimer who continues to have articles that show the people of the Territory and how resilient they are to events in the economy and always come out shinning. Darwin is a very small market of housing compared to eastern seaboard cities therefore the impact of fluctuations is felt more to the housing economy. The recent upgrades from the University to bring in more students, the greening of Darwin city by the council, the new 6 star hotel to be built on the waterfront, increased requests on cruise liners entering the the city, increased 5000 troops from the USA to be settled in Darwin, to name but a few all help turn the economy around. Darwin will slowly start to shine.

    Reply

      Michael Yardney

      September 14, 2019 Michael Yardney

      Yes it will pick up again – you’re right it is a very small market so moves in either direction are easily exagerated

      Reply

    Avatar

    September 13, 2019 Rob

    Buy during the GLOOM and sell during the BOOM. Darwin is the gateway city to SE Asia which surprises me that property is not always in demand, Aside from their hot and humid summers, Darwin has a lot to offer.

    Reply

      Michael Yardney

      September 13, 2019 Michael Yardney

      Rob, I’m sorry to say that there is very, very little upside in Darwin

      Reply


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