I know what you’re thinking …
“Course rents in Darwin are high! Anyone knows that. That’s a rediculous question!”
But, I would counter with this question, “Compared to what?”
I would suggest that renting in Darwin can be a much better and more affordable option that buying.
Let me share a personal example.
I’m currently in the process of renting our unit in Darwin. And, the rental market seems a bit slow right now. Very unusual.
Now, I’d be the first to admit … rents are high in Darwin. But, guess what? So, are the purchase prices!
So, if you don’t get a high enough rent, you’re essentially subsidizing someone’s accommodation.
For instance, right now we’re getting $650 a week for our beautiful unit in Parap. Parap is a section of Darwin located near the casino and Mindil Beach.
Now that seems like a handsome rent but check out the costs.
Buying Cost
Let’s start with the cost to buy.
Units like ours are selling for pretty low prices right now. Much lower than they were only a year or two ago. For instance, you could probably pick up one of these luxury 3 bedroom apartments for the $650,000 mark.
How do I know? One just sold for that price.
Previously, it was not unusual for these units to easily fetch over $700,000.
Holding Costs
Now let’s look at the costs to hold.
Body Corp Fees
First, you get hit with a $9,000 plus annual body corporate fee. Does the word “Wow” mean anything to you?
But, the amenities are outstanding. So, although the body corporate fees are seemingly high, it’s a case of “you get what you pay for.” The complex is world class. A few features as follows:
- 2 swimming pools
- Tennis court
- BBQ area
- Jogging/walking track
- 2 car parking spaces
- Amazing views of Darwin, the ocean or both.
- Secure compound
- External building and grounds maintenance
- Common area and building insurance
- Payment of property taxes
Loan Repayment
Now, let’s look at another cost; the interest payments on $650,000.
Shall we assume a 7.5% interest rate? Ok.
So, the annual interest payments are about $49,000.
Our annual costs are already at $49,000 + 9,000 = $58,000!
Other holding costs
But, we’re not done yet.
How about the cost of property management, landlord’s insurance, and maintenance?
Yes, maintenance. I remember last year paying over $3,000 for air conditioner repairs. Apparently, body corporate didn’t cover it. I made inquiries, but the bottom line was … pay the bill. So, I did. Not exciting.
So, let’s get a rough number for these items. Let’s say $5,000. Not a bad number considering property management would take up about $4,000 of it! Let’s go with this – on the low side – figure.
Total Holding Costs
Our total holding costs come in at about $63,000 per year!
Compare to rent
Now, let’s tally up the annual rent. At $650 per week it comes to a grand total of $33,800.
If my math is correct, that’s an annual shortfall of $63,000 – $33,800 = $29,200!
That’s $561 a week!
How exciting is that?
Who do you think is better off, the renter or the owner?
This is a case where the renter wins by miles. This is a case where renting makes a lot of sense.
Why buy, when you can rent for much less?
Luckily …
Luckily, we didn’t pay that much for our unit. We bought off the plan and therefore our numbers aren’t so “ugly.” But, our numbers aren’t pretty either.
We bought with the idea that someday we may want to live in this unit. So, we’ll hold for now.
But, you never know. We may reach a point where providing subsidized accomodation gets old. We may consider selling.
But now just doesn’t seem to be the right time.