NT IP in Darwin ?

Discussion in 'Where to Buy' started by SmoothGreyhound, 20th Jun, 2021.

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  1. SmoothGreyhound

    SmoothGreyhound New Member

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    Hey

    I see that Darwin that does not receive a lot of love on this forum . Any reason why? I was planning to buy my first IP in West Sydney but prices are a bit out of control now so the rental yield will be very small, and capital growth who knows with current prices.

    I saw that in Darwin 'best' suburbs like Fannie Bay/Parap you can buy a decent house ( tropical with piles) with 1000sqm with around 1mil if you are lucky. On paper sounds a much better deal since premium suburbs will always atract renters.

    Does anyone have any details regarding Darwin real estate market ? Seems that people avoid it compared to other states so I would believe there is a good reason why (read that population growth was negative recently so this could be a factor)
     
  2. Ajax

    Ajax Well-Known Member

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    Smoothgreyhound, here are my thoughts on Darwin (I bought in 2005 and have held)

    (1) It's a boom/bust property market (a bit like a mining town...extreme highs and extreme lows)

    (2) Darwin had the second most expensive capital city house price after Sydney (and ahead of Melbourne) at one point in 2012/2013

    (3) Heavily dependent on infrastructure projects such as the Darwin Icthys LNG gas processing plant which was built between 2012 and 2017 added up to an additional 20,000 people earning large paypackets to a population of 120,000

    (4) House prices fell hard after the boom from the big LNG project such that Darwin is now the second cheapest capital city in Australia

    (5) Herron Todd White have Darwin at the very early part of the investment clock-start of recovery)vs most other capital cities in rising market (means this run has a lot more to come).

    (6) More LNG processing trains to be built

    (7) More expenditure on defence

    (8) More expenditure on other infrastructure projects coming
    "
    Over the medium to long term, Darwin is set to benefit from several projects, including the $200 million CBD revitalisation project, the new Charles Darwin University campus and the $400 million ship lift facility at East Arm.

    There will also be the $4.7 billion gas exploration by Santos in the Barossa offshore gas field, the exploration within the Beetaloo Basin and the $20 billion sun cable that will run from Tenant Creek to Singapore to supply 20 per cent of Singapore’s electricity. "

    Where you can find investment opportunities in Darwin

    (9) Rents are rising strongly. The achievable rent on my property has increased by over 30% in the last 12 months (but this is still well below the rent achieved in 2012/2013)

    (10) When rents increase across the board house prices eventually follow. House prices have already risen about 25%. House prices are still well below 2012/2013 highs

    (11) Managing agents are very expensive....think 9% +0.9% gst + a monthly admin fee (such that managing agent's fees can exceed 10%). If you go for a cheaper agent you will probably discover why they are cheap.

    (12) Think 3+ aircons and how much an air con maintenance person can charge

    (13) Water usage (that is not excess water usage) is usually also paid by the landlord

    (14) Houses will need a termite treatment system (think of those 10ft high termite mounds facing north/south).

    (15) Council rates are high

    (16) There is a serious shortage of available rental property in many suburbs and asking rents keep being increased (vs a large surplus of rental properties about 5 years ago)such that my IP was empty for 4 months).

    (17) Gross rental yields can be high 5% or even 6 %

    (18) Be careful of large body corporate levies on units (elevators/gyms/pools). Go for houses

    (19) NT stands for Not Today...Not Tomorrow. You might find this out when you use a conveyancer to purchase your IP. "We won't be in the office until xx/yy/zzzz (the next 2 weeks). We've gone fishing. Please leave a message after the beep"


    Despite all of the above I still think there are gains of another 25%+ to be made in Darwin in the next 2-3 years and that it is a good place to invest in for a few years. It might even surprise on the upside (as it did on the downside). Buy now but be prepared to sell in 2-3 years time so you don't get caught in a quiet period.
     
    Last edited: 20th Jun, 2021
  3. SmoothGreyhound

    SmoothGreyhound New Member

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    Great answer. Thank you very much. Houses seem really big with big backyards and swimming pools. Indeed I am a little afraid of the maintenance costs, since in Darwin everything seems a bit more expensive than other capital cities.
     
  4. Ajax

    Ajax Well-Known Member

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    Just need to accept that capital gains in the next few years will likely far outweigh the inevitable higher maintenance costs. Maybe buy a house without a pool.
     
  5. hammer

    hammer Well-Known Member

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    Great write-up @Ajax!

    @SmoothGreyhound The boom/bust thing is real. You HAVE to keep it in your risk assessment and have a plan should the bottom fall out of the market.
    Unlikely at this stage...but I've given up trying to predict anything these days!

    Also worth mentioning that high rise units up here are financial suicide. DON'T DO IT. Townhouses and villa thingies in 0820 are fine, but unit blocks are generally a no-no.

    Houses are great - Elevated houses will have better capital gain but the maintenance will be higher. Brick low set houses are much cheaper but are all now around 50 years old in the Northern subhurbs so a roof inspection is a must.

    I'm very confident in the near-term Darwin market. So much so I just bought another one.

    Also PM me if you want the best conveyancer in the NT (BY FAR).

    Good luck!
     
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  6. My House QLD

    My House QLD Well-Known Member Business Member

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    1m? Wow, you'd buy a great asset in Brisbane for that.
     
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  7. sauber

    sauber Well-Known Member

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    Get me down to funky town!
    Nightcliff is a good area. I'm currently in kakadu and yes NT it not today tomorrow not Tuesday not Thursday. Which is true. You'll burn out up here if your from South of the border like me lol if you wanna know about NT pm me happy to answer questions.

    Nick (Sauber)
     
  8. Ariyahn2011

    Ariyahn2011 Well-Known Member

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    I can’t comment on an IP perspective, but from a potential buyer who is open to a PPOR one day I’ve been confused if I want to buy in Darwin or not. There was a time where I was so close to buying just prior to COVID-19 (when the market was down) – I had checked out a few homes, spoken to a finance broker and so on. We decided just to chill out for a bit as we were not totally certain we would live here long term. Fast forward to today, and the prices have gone up 25-30% as another posted noted. I simply could not justify spending a 30% premium for a forever home (PPOR) that might be worth less than what I purchased it for given the boom-and-bust nature of the Darwin market. I also did some comparisons to Brisbane, and it appeared I could get some nice homes for the price I would be paying here. I’ve always loved Brisbane and it remains to be a backup destination if Darwin does not work. There definitely is a shortage of rentals up here – so much so that we almost faced homelessness despite being employed with healthy savings. I think we got lucky with the house we are in. Our preference would be to stay here long term but I personally would like a good margin of safety before doing so in terms of buying a home, if that means we do not get that opportunity - that is okay.
     
  9. hammer

    hammer Well-Known Member

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    You can still do things safely (guarding against a crash)...
    Just buy a PPOR (not an IP) for around 450k.
    Make sure it is a house in the northern suburbs out of the storm surge zone and you'll be ok.

    450k is still waaay under the last peak and will be way cheaper than renting.

    You'd want to get it done soon though.
     
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  10. Ajax

    Ajax Well-Known Member

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    A good wrap for Darwin in the Herron Todd White June month in review:-

    "Darwin has had a 20.3 per cent lift in house values for 12 months, with 7.9 per cent in the past three months. This represents the strongest performance of any capital city in Australia."...

    "Whilst the stimulus packages for new builds and stamp duty concessions are being wound back, it is expected that the positive movements of the Greater Darwin market will continue. The forward pipeline of construction, mining and gas and infrastructure projects has placed the Northern Territory in a positive frame for the first time in a good while."

    Darwin houses now move to "rising market" on their property investment clock. Units are still at "start of recovery".

    https://static.htw.com.au/HTW-month-in-review-June-2021-Residential.pdf
     
  11. Big Maan

    Big Maan Active Member

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    Hi Guys

    Darwin was my first foray into investing way back in 2000. Bought a DHA house in Durack and within 6 years was able to sell it and pay off my PPOR in Sydney. Have watched the market rise and then stop and watched the long slope down. Whilst I have never lived there, I have visited or worked then many times. Absolutely love the place.

    I am considering putting my toe back in Darwin again. Similar conditions to that lucky run I had. The Covid 19 issues makes everywhere stutter currently but I am liking what I am seeing. I am looking at a 3 bedroom house in Muirhead or alterantively a 3/4 Bedroom house in Johnston, Lyons or Bellamack. Houses are nice in Muirhead and rental return better but as an investment 3 or 4 bedders ? I have heard and read that Palmerston and its suburbs are now not as desirable with higher crime rate and more land being released.

    The attraction of Muirhead is the location, airport, Hospital, University , Darwin CBD. But higher entry price even for 3 bedders or it is just has to be 4 bedders in Muirhead and surrounds. My budget is around 700K which would get my a 3 bedroom possible 4 Bedroom in Muirhead and good selection in Lyons, Bellamack, Johnstone , Rosebery ...... Potentially $100K difference between Muirhead and say Johnston.

    Any advice greatly appreciated. Take care everyone - stay safe.
     
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