Why Darwin is the hottest market for property investors
Darwin is outperforming other property markets amid a surge in investor activity, but questions remain over whether it is an attractive long-term investment opportunity.
Long-time underperformer Darwin has transformed into Australia’s fastest-growing property market and a hotspot for property investors. The question is how long will it last.
Darwin’s small housing market is leading the capital cities and also beating the regions for home price gains on the back of a surge in investors chasing the nation’s highest rental yields amid a lack of properties for sale.
Property advisory group Empower Wealth’s managing director Ben Kingsley said Darwin’s growth was being led by investors, with interstate buyers’ agents acting on their behalf actively chasing the higher yields.
“Darwin has been one of the worst-performing markets for the past decade – for capital growth, it has completely underperformed and there was quite a strong price correction in that market. It’s been dormant for over a decade,” he said.
“Off the back of very strong rental yields, which help with servicing for investors, and very limited supply, in concert also with a new government that’s proactive in business and expansion of the capital of the Northern Territory, we’ve seen all of the planets align to show that Darwin was going to be a market that had the potential to perform very strongly, and that’s what’s happened.”
Oliver Hume Property Group chief economist Matt Bell said Darwin continued to outperform the other capitals for value growth, despite its smaller size.
Cotality data showed Darwin recorded the highest rise in home values over the September quarter at 5.9 per cent and was also the leader for annual growth at 12.9 per cent, outpacing the other capital cities and each state’s regional areas.
Mr Bell noted Darwin delivered the highest total return, which takes into account property value growth and rental income, among all capitals of 20.6 per cent.
“The median dwelling value reached $558,595, keeping Darwin one of the most affordable capital city markets despite recent strong gains,” he said.
“Rental conditions remain extremely tight, reinforcing upward pressure on prices.
“Sales activity remains firm while listings stay well below average.”
The number of homes for sale at the end of September was 53 per cent below average, and Mr Bell noted sales volumes remained above average, highlighting “a clear imbalance” between demand and available supply.
“This environment continues to support price stability, even as affordability pressures increase,” he said.
“Overall, market conditions suggest that Darwin may continue to benefit from lower supply and relative affordability, which could support price growth over the medium term.”
Mr Bell said while all capitals showed below-trend vacancy, Darwin’s record-low vacancy rate of about 0.5 per cent sat well below the national average of 1.2 per cent and underscored the depth of rental scarcity in the local market.
Hotspotting director Terry Ryder said Darwin was a standout performer this year, with a combination of affordability, underlying demand from the resources sector and a tightening rental vacancy rate driving a sense of urgency among buyers.
“This powerful upswing has been building steadily since late 2024, outpacing many southern markets,” he said.
Hotspotting named Darwin as one of “the winners” in its spring price predictor index, after tipping at the end of 2024 that it would be a property investment hotspot in 2025.
“We could see the evidence that Darwin was going to rise this year,” Mr Ryder said.
“We could see buyer activity starting to rise but also looking at the underlying economic factors which fuel demand for real estate – the infrastructure spend, for example, is strong there.
“We thought that investors would target Darwin because it’s got the cheapest houses in capital cities in Australia and also by far the highest rental yields. That’s really starting to play out quite strongly this year.”
Cotality data released this week showed Darwin recorded the largest increase in rents of 4.2 per cent in the September quarter and 7.6 per cent annually, to a median weekly rent of $687.
Yields have tightened nationally since the RBA’s first interest rate cut in February, as growth in home values outpaced rents. Darwin had the largest tightening in gross rental yields among the capitals since February with a 24 basis point decline, Cotality said.
But its gross rental yield of 6.47 per cent was still the highest among the capital cities.
A boom-and-bust market
Mr Kingsley, who is also the chair of the Property Investors Council of Australia, predicted at the beginning of 2025 that Darwin would be the No.1 performing market this year. But he cautioned that it was a case of “buyer beware” for investors over the long term, unless the economy continued on its growth trajectory.
“It’s a speculative buy,” he said. “If you’re looking at that market, it can be a bit of a boom-and-bust town. That’s the reality.
“It went through a very strong period during the last mining boom and then effectively overcooked itself and has been in that hiatus for about 10 to 12 years. We’re now starting to see it come out of that hiatus and performing incredibly strongly.”
Investors with a short-term focus may want to get in for maybe five to seven years and then try to get out at its peak, he explained.
As a long-term investor, he “wouldn’t necessarily be jumping into Darwin”, given its small market and reliance on the cyclical mining and agriculture industries.
“If history were to repeat itself where we see a strong economic revival for the next three to five years, then property prices will be quite strong over that period,” Mr Kingsley said.
“But then if we see a collapse in the economy for whatever reason, the reality is that will then impact population and that level of demand, and so ultimately will see property prices correct themselves from those peaks.”
Mr Kingsley said Darwin was like other larger remote regional towns such as Cairns, Townsville and classic mining centres in the Pilbara that “go through these types of boom-bust cycles”.
He added that owner-occupier appeal was critical for long-term returns as opposed to short-term speculation.
Oliver Hume analysed Darwin’s performance over the past decade, concluding that it looked less attractive when taking a long-term rather than short-term view.
“Our view is that although it is currently the best returning property market in the country and probably does have a good chance to deliver stronger investment returns over the short-medium term, over the longer term, the much more variable capital price growth for Darwin dwellings and some economic risks related to increasing outflows of population to other states and softening employment growth makes it a less attractive opportunity,” Mr Bell said.
“Over the last 10 years, it has had the weakest capital price growth of all the capital cities, but the highest rental yield.
“But the capital growth weakness has been the dominant force and it has had the seventh-ranked total return over the last decade.
“If rental yield is what an investor is looking for, Darwin is probably the answer. If it’s capital growth, it’s probably not.”
Mr Bell said dwelling supply in the Northern Territory remained well below long-term norms, keeping new housing delivery constrained. The NT’s population grew by 1.3 per cent over the past year, well above the 10-year average of 0.7 per cent, he added.
“While population gains support near-term demand, net interstate migration remains negative, and outflows have been rising in recent years.
“Employment growth has also softened relative to national trends, posing potential downside risks to household formation and buyer confidence if labour market conditions weaken further.
“Additionally, Darwin’s employment base remains highly exposed to the defence and public sectors, which can make local conditions more volatile compared with larger state economies.”
More Coverage
To join the conversation, please log in. Don't have an account? Register
Join the conversation, you are commenting as Logout