A real estate group is warning investors that impressive median price growth in one capital city is the result of new developments and off-the-plan purchases.
The latest statistics from RP Data show that Darwin real estate values grew by more than seven per cent over the past 12 months, but according to Raine & Horne, the figures need to be approached with caution.
Glenn Grantham, general manager Raine & Horne Darwin said the settlement of major apartment projects was distorting the city’s capital growth results.
“The RP Data figures need to be put in context, with a spate of large apartment project settling over the past few months,” Mr Grantham said.
“The prices for many of the off-the-plan apartments settled recent were obtained 12, 18 or even 36 months ago, and don’t necessarily reflect the current market, especially for established stock.
“There have probably been 200 new apartments settled in the last few months, so the prices of these settlements have influenced the median price in Darwin.”
Mr Grantham said the glut of new apartments was also taking its toll on the rental market, with rents for some apartments in the CBD down by 10 to 15 per cent compared to this time last year – something with obvious and far-reaching implications for investors.
“Falling rents are particularly affecting interstate investors that have based their buying decisions on strong yields. Lower rents will affect cash flows, forcing some investors to sell out, which is creating a surplus of apartments for sale, which in turn, impacts prices,” he said.
The proliferation of the National Rental Affordability Scheme (NRAS) apartments as well as the NT government’s Real Housing for Growth strategy, have also combined to impact yields, according to Raine & Horne.