Just spent a few days in Darwin. Turns out there’s downward pressure on rents right now.
How so?
Well, here’s some on the ground “skinny” to verify rents are on the downswing.
First, I had a heck of a time getting my three bedroom house in Rosebery rented. Rosebery is a suburb of Palmerston; located about 20 km south of Darwin. Palmerston is a fast growing city; it’s now overtaken Alice Springs as the second largest city in the Northern Territory. It’s population is around the 30 thousand mark. The property went vacant in November 2014 and then we dropped the rent by $10 and finally got it happily rented in late February. That’s a long time to go without rent.
Rents are still pretty high. We have our place rented at $580 per week. But, these days renters are asking for – and getting – lower rents as properties sit vacant. I learned about this while having a coffee with my Palmerston property manager.
Next, I had an inspection of our 3 bedroom unit in Darwin and my property manager shared some market insights. “Dave, I’ve got several units in the building that I can’t get rented. There seems to be fewer people looking and lots of properties for rent on the market. People are asking for $100 a week discounts and they’re getting it.”
Keep in mind, a $100 dollar discount may mean the rent dropping from $1,000 per week down to $900 per week – still a lot of cash! But, for the landlord, this could mean the difference between a property that’s generating a small profit and one that’s losing money. Remember, these $1,000 per week apartments sell for close to a million bucks! So, the margins are very thin.
Luckily our unit is happily rented for another year with the same tenants at the same rent. So, it looks like we dodged a bullet.
I’ve been in the Darwin property market since 2002 and it seems to go up and down. So, this downward pressure on rents is really nothing new; it’s part of the Darwin property investment landscape.
I’m not sure what’s causing the downward pressure. A first guess would be all the new residential construction that’s going on; maybe folks are choosing to buy a house instead of renting. But, you should see the price tags on these homes – they’re huge. And, the buying costs are outrageous, especially the dreaded “STAMP DUTY.” I’ll leave all that for another discussion later on … actually I’ve already discussed stamp duty at length in other articles.
So, with cost of buying so high, I would think renting would still be a very attractive option. But, maybe folks are leaving town. That would explain the vacancies and negotiating downward rents. And, if folks are leaving, that may mean jobs are going backwards. Anytime you see the job market weaken you see an associated weakening of the rental market; lots of jobs means high rent and low vacancy. The opposite is also true.
Anyway, those are my thoughts on the Darwin rental market right now; do you have some insights to share? Let me know.