Darwin’s strong rental yields luring in investors

Units and townhouses are popular with investors looking to buy into the Darwin property market. Photo: Floss Adams

Strong rental yields and relatively affordable property prices are attracting property investors back to Darwin, according to the latest Herron Todd White Month in Review.

The March report by the property valuation and advisory company focused on investment markets in Australia, with Darwin showing promising signs of increased investment activity.

Terry Roth, Herron Todd White NT Director, said the Darwin market remained stable at the end of 2022 and into 2023 with strong rental yields of eight per cent plus not unusual.

“Agents are advising investors that investors have re-entered the market with local investors, prominent and interstate investors returning to the market chasing high returns,” he said.

“Investors who want to enter this space are chasing the higher rental yields with positive cash flow and are not necessarily buying with the intention of strong capital gains.”

Luxury units, such as this sub-penthouse on the market at 22/9 Esplanade, Darwin, are proving popular with investors.

Mr Roth said demand for apartments in the city center appeared to be strong, while short-term Airbnb-style rental accommodation was also in demand with these properties eclipsing returns of 10 per cent gross in some cases.

“Units and townhouses have always been popular with investors due to lower maintenance and higher returns,” he said.

“Talking to operators, investor demand can range from an affordable two-bedroom, two-bath unit ($400,000 to $450,000) to luxury units priced at $750,000 plus.

“What can be seen as a positive sign is that prices for CBD units are still 20 to 30 per cent of the 2015 peak, so there is potential for capital growth as there is limited further supply on the horizon.”

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Mr Roth said new homes with long-term leases were also attractive to investors with returns on offer of between five and six per cent gross with the added benefit of depreciation.

“With high rental yields and relative affordability, (Darwin) remains a market that will always attract investment,” he said.

Newer home, like this modern building for sale at 2 Notley Place, Parap, attracts investors.

Mr Roth said while other capital markets in Australia were facing declines, Darwin was not.

“The market peaked in 2015, bottomed in 2019 and has recovered in the last four years,” he said.

“The latest interest rate increases did not have the same effect on the market as in the southern states and prices remained stable through the previous nine interest rate increases.

“How these increases will affect the market going forward is a point of discussion.

“Many commentators believe this could start to tighten later in the year as more mortgages come out of their fixed terms, serviceability becomes more difficult and homeowners who have trouble refinancing at new higher rates may be forced to sell.”

Mr Roth said it should be noted that compared to other capital cities, Darwin homes were still relatively affordable.

According to the latest REA data, Darwin is the second cheapest capital city with a median house price of $585,000 behind Perth ($560,000).

Sydney was the most expensive with a median house price of $1.33 million while Canberra was second ($975,000) and Melbourne third ($899,700).