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