Regional NT Property Market Update August 2020

Alice Springs Property Update

The Northern Territory continues to get a favourable run as far as avoiding outbreaks of COVID-19 infections is concerned and this is no doubt due in part to the low population density making social distancing much easier. As a result, the local property market in Central Australia has not been impacted to any great extent by Coronavirus.

Local real estate agents report good levels of activity from both buyers and sellers and NT Government statistics indicate that transaction numbers have remained steady, with 55 house sales and 26-unit sales completed in the quarter to June 2020. Median prices for both houses and units have shown an uplift in the recently completed quarter, giving cause for some level of optimism in the local market. Although a reasonable percentage of individuals and businesses rely on tourism for their livelihoods, the local economy is reasonably diverse. We will watch with interest however, the predicted cliff that looms with the phasing out of federal government aid packages such as JobKeeper and JobSeeker subsidies and free childcare.

Data from the 2016 Census reveals that 52.6 per cent of all occupied dwellings in Alice Springs are rented, which is slightly above the Northern Territory figure of 50.3 per cent and significantly higher than the Australia-wide figure of 30.9 per cent. This is indicative of a fairly transient population, who have no desire to own property in the area, preferring the flexibility of renting. From the writer’s observations, it would appear that the typical profile of an investor in the Alice Springs market is a single or couple who either currently live here or have at some stage lived in Central Australia. Despite healthy rental returns, where in excess of six per cent is not unusual, it seems Alice Springs is not an attractive location for investors who have no connection with the area. Certainly the lack of capital growth in the market over recent years does remove some of the gloss of getting good rental returns.

On the face of it, rents paid in Alice Springs are considered higher than comparably-sized towns in the eastern states, commensurate with the higher than average market value of dwellings here.

As an example, a late 1990’s built, unrenovated two-bedroom, one-bathroom unit in a complex of 12 has recently gone under contract for $375,000 with a sitting tenant in place paying $440 per week rent on a six month lease. This is a well situated unit in a desirable area of town, within close proximity to the CBD, schools and entertainment venues. It’s showing a gross return of 6.1 per cent. Looking at stand alone dwellings, an average condition threebedroom, one-bathroom home that was built in the 1980s to 1990s is fetching low $400,000s in the current market and can easily be rented for $500 per week, yielding around six per cent minimum for the investor.

These figures are supported by statistics released by the REINT for the March 2020 quarter, revealing the average yield on a three-bedroom dwelling in Alice Springs to be 5.8 per cent and 6.6 per cent for units and townhouses. Vacancy rates are historically low in Alice Springs, generally fluctuating between three and five per cent.

All in all, Alice Springs has a strong investor market, with more than 50 per cent of homes owned by investors. Many of these properties are tightly held given the good rental returns and lack of incentive to sell, taking into consideration the recent history of minimal (or negative) capital gains. The lack of capital gains and perhaps just the sheer isolation of the place are seen as the major factors why investors with no connection to Central Australia are perhaps reluctant to view it as a serious option for investing in property here.