Adelaide and Darwin revealed as top picks for investors

In an indication that the rental market’s tight conditions will not ease anytime soon, Mr Trimble provided some on-the-ground insight on rental demand. 

“Most of our offices in Adelaide report groups of 20-30 potential tenants rocking up to every open home,” Mr Trimble said. He added that property managers are working “round the clock” to assist tenants in finding a home. 

As high demand for rentals means vacancy rates will be extremely low for the long term, Mr Trimble stated that “the risk of having an empty investment property is shallow and means they can bank on a smooth and consistent cash flow”.

He explained that one of the factors tightening the screws on vacancy rates is the increased number of employment opportunities in the city. 

“Plenty of immigrants will find their way to Adelaide because of the state government’s investment in jobs of the future through investment in entrepreneurial precincts such as Lot Fourteen with its focus on innovation, research, education, culture, and tourism.

“Already home to 1,000 people, big employers such as the Commonwealth Bank, Amazon, Google and Microsoft are now operating from Lot Fourteen and Adelaide with more major growth employers set to come,” he stated. 

He noted that this trend comes at a time when the federal government is eyeing increasing the migration cap potentially to 200,000 per year. 

Home Affairs Minister Clare O’Neil stated in August that the prospect of boosting the current annual migration intake of 160,000 would be on the table at the federal government’s jobs and skills summit held in Canberra from 1 to 2 September. 

She’s since confirmed that the annual migration intake would increase to 195,000 for this financial year. 

Mr Trimble said that the raising of this cap would set the tone for housing demand. “We expect Adelaide’s record low vacancy rates to continue long-term providing investors with stable returns,” he forecast.

Adding to the case that the South Australian capital is the dreamboat among capital markets, the expert highlighted that Adelaide boasts affordable real estate property prices that are almost half of that of major cities such as Sydney. 

For perspective, Mr Trimble cited the latest data from CoreLogic. “Median dwelling values in Sydney are almost $1.01 million, and in Melbourne, the median is nearly $792,000. In Adelaide, the median dwelling price is just over $650,00,” he said.  

With such figures, the expert stated that: “A savvy investor with $1 million could almost buy two properties in Adelaide rather than one in Sydney and bank on an almost risk-free and consistent return.”

Rising rate environment will not rattle Darwin, expert says 

Similar to Adelaide, the general manager for Raine & Horne Darwin, Glenn Grantham, stated that the Northern Territory capital boasts a combination of low property prices, tight vacancy rates and high investment yields — making it a top pick for property investors. 

“In the Darwin market, we have the combination of real estate affordability compared to the other capitals, the best investment yields that can be as high as 7-8 per cent and almost zero vacancy rates,” Mr Grantham said.

As of July, data from SQM Research and Domain showed that Darwin had a vacancy rate of 0.6 per cent. 

According to CoreLogic, Darwin’s average dwelling value stood at $509,833 at the end of July — making it the most affordable city among capital markets. 

And while the rising interest rates have rattled other markets, the expert argued that Darwin is better positioned compared to its bigger counterparts to weather out a high-cash rate environment. 

He stated that average mortgage rates are still well below historical averages, making it a great time to buy into the Darwin real estate market for owner-occupiers and investors.

To prove his point, he highlighted that even after the two rate hikes by the central bank in May and June, “we still have some of the lowest interest rates in history”. 

According to Trading Economics, the average mortgage rate in Australia was 6.89 per cent from 1990 until 2022.

“If buyers want to take advantage of interest rates that are still well below the long-term average, logic suggests that buying quality, well-located and affordable properties in Darwin is a logical option,” Mr Grantham stated. 

The expert also noted that by late June, there were lenders still offering variable home loan rates below 3 per cent. “So, the message to buyers is to get into the Darwin market now because interest rates are not going backwards,” he advised. 

Mr Grantham added that the prospect of higher interest rates has historically generated a frenzy of buying activity in the city. 

“Any investment banker from down south predicting massive falls in values is in complete contradiction of history. Usually, rising interest rates occur because demand for real estate is booming in Darwin,” he stated. 

The general manager also explained that lenders have financial buffers in place to protect property buyers. 

“The banks built-in 3 per cent mortgage buffers against rate rises in July last year because they knew where interest rates were going. This buffer will cushion homeowners who have borrowed in the last few years,” he said.

Given that the Darwin market hasn’t experienced the same levels of capital growth as the southern capitals over the past two years, the expert expressed his confidence that the city will not be hit by the value downturn any time soon. 

“Our market always operates contrary to the east coast markets, and our market is nowhere near hitting its peak,” Mr Grantham stated.