The title shouts, $1M Medians in the Top End! (my exclamation point.) The title got my attention. “Are you telling me we could see the median house price rise to $1 million?” I asked myself.
The article is on page 102 of the March 2011 The Australian Property Investor (API) magazine. The subject is the rising house prices in both Darwin and Alice Springs.
The author, Lauren Cross, starts by telling the story of the first million dollar home in Alice Springs. It tipped the pricing scales at a hefty $1.115 million; smashing right through the million dollar barrier.
The article tries to explain an unusual phenomena; the number of total sales has dropped but home prices haven’t. Home prices continue to ratchet upwards.
And, this is apparently the case for both Darwin and Alice Springs.
The article “investigates why the prices of homes refuse to budge …”
I went looking for the answers in the article. The answers to why home prices in the top end are just that … top end? Here’s what I uncovered.
Supply and Demand; Land Release
“We haven’t seen any land supplied by the Territory Government for quite some time and this has exacerbated the high real estate prices.” says Qenting Kilian Real Estate Institute of the Northern Territory (REINT) Chief Executive Officer.
So, it looks like the government’s slow land release program is a main culprit.
Prices; Not Overinflated
“Property prices (Darwin) haven’t really dropped, because they weren’t overinflated in the first place.” says Jeremy O’Donohue from O’Donohue First National in Darwin. He goes to explain how Darwin doesn’t have housing 40 minutes outside the city like the other major capital cities do. He says, folks in Melbourne can drive 40 minutes outside the CBD and buy a house for $300,000 to $400,000.
But, drive 40 minutes outside of Darwin and you’re in the bush. Keep in mind, Palmerston is only about a 20 minute drive from Darwin. So, after 40 minutes, you’re well out into the never never! No sleepy residential towns out there.
Mr O’Donohue talks about downtown properties in Melbourne selling for as much as $10 million. But, he compares this to downtown Darwin, where the highest prices are in the $2-$3 million range. Much lower than other capital cities. “Some people think our market is expensive but I still don’t think you can compare it to anywhere else.”
Building Costs
Finally, building costs are a driver. “David Booth from David Booth Real says … the Darwin market … will still become more expensive because every year building costs in the territory go up …”
So, along with the higher land prices goes the higher build prices. Another factor driving territory home prices higher.
Conclusion
House prices in the Northern Territory continue to climb, but why?
From this article, I discovered three main reasons as follows:
- Slow government land release. Drives the price of land higher as there is less land to build on. Higher land prices leads to higher home prices.
- Prices are still not expensive compared to other capital cities. This means there’s room for prices to rise further. If you want to live in or near the Melbourne CBD, you have to pay. Apparently, the same applies for Darwin and Alice Springs.
- Building costs continue to rise every year. As the cost to build rises, so does the price of homes.