RESIDENTIAL MARKET OVERVIEW

The September quarter has seen the Darwin residential market lead the nation, with strong sales figures and exceptionally high rental returns. Market sentiment in Darwin appears to have lifted significantly, with agents noting that homes listed on the market are rapidly snapped up by buyers.

In particular, house prices in Palmerston have shown remarkable strengthening over the past 12 months, with the median price up by approximately 13%. It is noted that in Palmerston the price bracket for buyers has crept up with activity now centered on the $500,000 to $600,000 price bracket, accounting for 43% of all sales. Whilst in Darwin $500,000- $600,000 remained the most popular bracket accounting for 42% of all house sales. Affordable supply will be a key issue in the next 12 months, as there is minimal stock priced under $600,000 available on the market.

“...Darwin leading the nation in average rental prices ...”The unit market recorded robust growth in the September quarter, with the overall volume of sales increasing by 29%. The $400,000- $500,000 price range reflected the most transactional activity for unit purchases, with this trend expected to continue for the remainder of the year.

Land sales in Palmerston continued to bubble away at a steady pace with a large portion of sales in Bellamack. Land supply for new green-field sites in Palmerston is anticipated to remain stable over the next 12 months.

The rental market continues to be Darwin’s stellar feature, with Darwin leading the nation in average rental prices. Rental rates are predicted to increase further over the next 6-12 months; however this brings with it the potential for significant change in the social dynamics of Darwin. Clearly, lack of affordability will impact negatively on average workers and families.

DARWIN RESIDENTIALRESEARch & FOREcAST REpORT

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Q3 2012 | RESIDENTIAL

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MARKET INDIcATORS FOREcAST - 6 MONThS

OVERALL pERFORMANcE

TRANSAcTION AcTIVITy

SuppLy

DEMAND

SENTIMENT

VAcANcy RATE

EcONOMIc gROWTh

INfRASTRucTuRE

POPuLATION GROWTH

SuMMARy

The Darwin rental market has seen significant price increases in the past year whilst supply remains tight.

SEpTEMBER QuARTER

Darwin: Australia’s Safest Market...

• Darwinrentalmarketfacesshortageofsupply

• SalesvolumeforunitsinDarwinincreasedby29%

• MedianhousepriceinDarwinandtheNorthernSuburbsrecordedat$585,000.

• PalmerstonmedianhousepricerapidlyclosinginonDarwin,recordedat$532,500.

TOp TEN SALES

SUBURB PROPERTY DESCRIPTION PRICE

Fannie Bay 13 Conigrave Street House $1.82m

Knuckeys Lagoon 945 McMillans Road Rural Living $1.685m

Darwin 102 Esplanade Pent-house $1.495 m

Larrakeyah 1/23 Paspaley Place Townhouse $1.37 m

Larrakeyah 5 Hickey Court Vacant Land $1.30 m

Darwin 4/13 Esplanade Apartment $1.20 m

Virginia 50 Beasley Road Rural Living $1.175 m

Fannie Bay 4/130 East Point Road Townhouse $1.10 m

Bayview 27 Bayview Boulevard House $1.085m

Rapid Creek 36 Nightcliff Road House $1.00 mSource: Land Titles Office & colliers International Darwin

N.B. Information for this table was obtained from a public domain source

TOTAL SALES OF DWELLINgS (hOuSES & uNITS)The total sales value of all residential property in Darwin and Palmerston recordedfortheSeptemberquarterwas$364.8millionandcomprised732transactions. The overall sales volume was slightly lower than the previous quarter, where it was recorded at $370.2 million with 734 transactions. In the regional breakdown, Darwin and the Northern Suburbs recorded a total of $269.5 million and Palmerston recorded a total of $95.4 million.

RENTALSReports suggest that Darwin is facing a severe rental crisis, as the current number of vacant dwellings in the NT stands at approximately 280properties.Darwinhasmaintaineditspositionforthehighestrentalreturns of any Australian capital city, recording an average gross rental yield of approximately 6%, in conjunction with a very low vacancy rate.

According to data from the Australian Property Monitors, in the 2012 financial year themedian house rent grewby 18%withDarwin nowrecording the highest median house rent in the nation at $700 per week. It is anticipated that rental pressures in the Darwin market will continue due to declining affordability, housing supply shortages and an increase in the workforce population.

The influx of interstate workers requiring accommodation has been a major contributor to the amount of stock available for rent. It is noted that even out-dated homes which require significant maintenance are achieving rates well-above average. For example, ex-housing commission homes situated in the Northern suburbs are able to achieve rental rates which average between $550- $600 per week.

The rental rate for units has also risen, with the average unit rental price now sitting around $500 per week. According to Australian Property Monitors, Darwin recorded the highest yields for units at 6.1%. The demand for executive apartments continues to improve, with large companies dominating this type of lease tenure and paying on average $800 per week. Conversely, demand for top of the range executivehousing, penthouses and luxury units (e.g. $1000 plus) is quite shallow by comparison with extended vacancy periods common.

Darwin’smedianhousepricewas$585,000.

DARWIN hOuSE pRIcESIn the September quarter the total sales value for homes in Darwin and theNorthernSuburbswasrecordedat$98.2million.Thiscomprisedof156transactionsandamedianpriceof$585,000.Transactionalactivityshowed a decline of approximately 26% on the previous quarter figures, though this was attributed to a lack of stock. In contrast, the total sales value of the June quarter was $132.7 million and the median price stood at $607,000, taking the figures back to much the same level recorded in March 2012.

TOp pERFORMINg SuBuRBS

SUBURB AMOUNT OF TRANSACTIONS

MEDIAN PRICE

Leanyer 14 $620,000

Wulagi 12 $559,500

Anula 12 $522,500Source: Land Titles Office & colliers International Darwin

DARWIN - MOST pOpuLAR SuBuRBS

Leanyer recorded the most transactional activity for the quarter with 14 sales and a median price of $620,000. It continues to be one of the most popular suburbs in Darwin due to its family-oriented neighbourhood.

Both Anula and Wulagi were the next most active suburbs, with each recording 12 sales. In Anula the median price was $522,500 whilst in Wulagi the median price sat slightly higher at $559,500.

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RESEARcH & fOREcAST REPORT | Q3 2012 | RESIDENTIAL | DARWIN

Darwin unit rentals are among the highest in the nation.

LANDIn Palmerston, land sales remained consistent with the previous quarter with 66 transactions recorded and a total sales value of approximately $16 million. The median price for a vacant block of land increased to $235,000, and reflected increasing demand for green-field sites which allow families to build brand new homes. Land sales in Palmerston were predominately for the new stages released in Bellamack.

In Darwin, 18 vacant land transactionswere recordedwith amedianprice of $340,000. Whilst vacant land is limited in Darwin, sales are anticipated to remain steady during the staged release of land in the Muirhead subdivision. Muirhead is Darwin’s newest subdivision and will provide up to 1096 allotments, for residential development.

Source: Land Titles Office & colliers International Research Darwin

pALMERSTON MEDIAN hOuSE pRIcE

uNITSUnit transactions showed strong improvement in the September quarter, with the overall value of sales increasing by approximately 29% to $165 million. This comprised 331 transactions and was attributed to the settlement of several new developments including C2 Esplanade and Zest apartments in the CBD. The median price was lower than the previousquarterthough,andwasrecordedat$438,000.Itwasnotedthat 64% of all unit sales were priced under $500,000, with a large portion of units selling in older established buildings and in the Zest complex which comprises of 1-bedroom units.

The Darwin CBD continued to reign as the most popular suburb for unit purchases with 147 transactions recorded. The total sales value in the CBD was recorded at approximately $75 million, accounting for 44% of all unit transactions in Darwin and the Northern Suburbs. The CBD median price was significantly lower than the previous quarter at $425,000, in comparison to $600,000 in June; however this is believed to be attributed to the sales of new budget priced developments which are experiencing increased demand.

The second most popular location for units was Stuart Park, where 30 sales were recorded. The median price for a Stuart Park unit was $519,000 and reflected the strong appetite for larger apartments situated in boutique complexes. Stuart Park remains a favourite alternative for those seeking accommodation on the city fringe. In Palmerston, the unit market continued to record relatively steady demandwith49 transactions and a total salesvalue of $18.4million.An affordable median unit price of $365,000 is anticipated to encourage strong demand in the Palmerston market.

EXEcuTIVE ApARTMENTSIn the September quarter there were a larger number of transactions for CBD executive apartments. These were predominately from the new C2 Esplanade development. The highest price achieved for an executive CBD unit was $1.495 million for a penthouse apartment located in the new C2 Esplanade complex.

It appears investors are regaining confidence in purchasing executive stock as rental returns have become more enticing and more secure due to tightening supply. Corporate leases have become a key feature in the executive apartment market, and highly sought after by larger companies wishing to secure accommodation for their staff.

pALMERSTON hOuSE pRIcESThe volume of house sales in Palmerston remained steady over the September quarter with 112 transactions and a total value of $61.3 million. These figures were virtually identical to the June quarter where 113 transactions and a total value of $60.2 million were recorded. The median house price in Palmerston however continues to go from strength to strength, increasing for the fifth consecutive quarter to $532,500. These constant increases since September 2011 have seen the median price in Palmerston rise by approximately 13% or $62,500.

“Palmerston’s median house price increased for the fifth consecutive quarter..”

Woodroffe was the most popular suburb for purchasers in Palmerston, with 16 transactions recorded and a median price of $461,500. Prices in Woodroffe sat at the lower end of the Palmerston scale and remain attractive to first home buyers. The second most popular suburb was Durack with 15 transactions and a median price of $535,000. Durack remains one of Palmerston’s favourite estates due to its proximity to Palmerston CBD, its green streetscapes and golf-course and lake views.

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RESEARcH & fOREcAST REPORT | Q3 2012 | RESIDENTIAL | DARWIN

OutlookThe Darwin property market is gaining heat in both the rental and sales market as supply begins to dwindle. Vacancy rates in the Territory have significantly dropped to approximately 0.5%, following an influx of new workers. It is anticipated that rental rates in Darwin will remain tight over the next 12 months and continue to raise unaffordability for the average income family.

“...rental rates in Darwin will remain tight over the next 12 months...”

Lack of affordability may push some buyers out of the residential market, which in the longer term could result in an easing of capital growth. To counteract any potential slow-down in the economy due to a higher cost of living, the Reserve Bank actioned another rate cut in the October 2012 board meeting. The official cash rate now stands at 3.25% and is anticipated to help draw first home buyers into the housing market.

“...Lack of affordability may push some buyers out of the residential market..”

Access Economics forecasts that in 2012-2013, economic growth in the Territory will strengthen to 3.3% through private construction, machinery and equipment investment as a result of major projects like the INPEX LNG project, the Marine Supply Base and on-going expansion in the Kitan and Montara oilfields.

According to Access Economics over the next 5 years to 2016-2017, growth in the Territory is expected to average 4.4% per annum and is attributed to private housing investment and exports to Asia.

As Darwin continues to blossom into a multi-faceted city, its residential housing market is expected to entice investors. The Territory is able to offer abundant employment, modern infrastructure, quality schooling and amenities, in addition to new housing which provides an ideal environment for sustained economic growth.

Information Sources

Easy Access, ABS, Land Titles Office, NT Government, Access Economics, AMP National Centre-Social and

Economic Modelling, Australian Property Monitors, REINT, NT Treasury, Territory Economic Review, RP Data,

National Bank of Australia Residential Property Index, Colliers International Research DarwinI

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Colliers International does not give any warranty in relation to the accuracy of the information contained in this report. If you intend to rely upon the information contained herein, you must take note that the

information, figures and projections have been provided by various sources and have not been verified by us. We have no belief one way or the other in relation to the accuracy of such information, figures and projections.

Colliers International will not be liable for any loss or damage resulting from any statement, figure, calculation or any other information that you rely upon that is contained in the material. COPYRIGHT - Colliers International 2012.

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RESEARcH & fOREcAST REPORT | Q3 2012 | RESIDENTIAL | DARWIN

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