Unexpected pandemic-driven strong relocation to the Northern Territory substantially increases demand and short-term price increases. Modest growth, however, is likely over the long term.
The Northern Territory market has shown signs of stabilisation after many years of weak property market conditions, and is now showing signs of revival.
Prior to COVID-19, after several years of major price reductions, the market started to improve and, in some areas, to stabilise. Unexpectedly, since the pandemic began, the NT Government estimates that between 2,000 and 4,000 people have relocated to the Northern Territory.
This has a marked impact on the small Darwin market that is now experiencing solid demand for housing, and particularly for rental properties.
While government incentives and defence expenditure by both the Australian and US governments are likely to create jobs and attract people to the Top End capital, along with some renewed mining activity, the economy of the Northern Territory is unlikely to show sustainable strong growth. Consequently, once COVID-19 has passed, it is likely that population growth will remain modest.
Therefore, while short-term price growth is expected to be solid at this point of time, unless there is a major increase in business investment, it is likely that medium and long-term capital growth will only be modest.
The unexpected population growth due to the pandemic in combination with government incentives have increased demand for houses.
Further, as with other states and territories, ultra-low interest rates make it cheaper to buy than rent in Darwin for owner-occupiers with interest-only loans.
However, over the medium to long term only modest capital growth is likely.
Units in the NT carry a high level of risk of delivering negative capital growth due to a combination of oversupply, lending restrictions and low demand, further reduced by COVID-19.
While the current demand has substantially increased rental demand for investment properties, overall units carry a higher risk. It should also be noted that in terms of house price-to-income ratio, houses are very affordable. Consequently, owner-occupiers have little incentives to buy units.
In relation to investors, the Darwin unit market has been experiencing low demand from investors following the end of the mining boom.
The other states and territories are considered substantially more attractive for investors, and this is highly unlikely to change in the foreseeable future.