Month-In-Review-March-2015

Month in Review
March 2015
Northern Territory
Darwin
Darwin has shown stellar property growth over
recent years so exactly how will the market react to
interest rate cuts put in place by the RBA? Over the
past decade the Darwin housing market has been
a solid long-term performer, recording some of the
highest capital gain rates of the major cities.
Reductions in cash rates will
inevitably bring mortgage rates
even lower, but how much
difference will this make when
they are essentially at rock-bottom
levels already.
Theoretically these cuts should provide a boost to
the current flattening house price levels. However,
this is counteracted by low consumer confidence
and softer labour markets. Higher unemployment
rates and prudent macro-economic policies by the
RBA will further inhibit chances of a steep climb in
property prices. We can expect some increase in
first home buyers attempting to get their foot in the
market in response to the extremely low interest
rates, however recent changes to the FHOG will
limit purchasing of existing stock and shift these
buyers to new stock only. Owner-occupiers must be
wary if and when the rates head north again, being
sure that they aren’t over committed to a property,
and can afford increases in mortgage repayment
requirements.
Darwin is an excellent example of a ‘shallow’ housing
market which is characterised by minimal volume
and depth. We can expect prices to stabilise or
even marginally decrease in response to a current
downturn in commodity prices unless recovery in the
tourism sector boosts interstate investors. Changes
into the development phase for the Ichtys Inpex
project will also lead to higher end tenancies being
taken out by contract workers. The Darwin property
market is very much employment driven, we have
seen this by its reactionary boost from the Ichtys
Inpex project over the past few years.
Darwin is still experiencing some of the highest
gross rental yields of any capital city market due
to strong population growth and increased rate
cuts will definitely keep investors happy, offering
a larger spread of their money and presenting
better returns. But whether we see a bumper year
in price growth due to lower interest rates is a lot
less likely. Correlation between interest rates and
property prices is a fickle thing. When speculating
about property prices in the greater Darwin market,
an educated guess would look a lot closer at
employment levels and infrastructure projects than
interest rates.
Residential
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