For property developers, investors, builders, corporate landlords and construction workers in the Northern Territory, the results from the Property Council of Australia’s latest Property Confidence survey is almost certain to bring a smile.
That survey, published on April 19, represents the forward looking views of more than 2,300 property and construction professionals from around the country and shows overall levels of confidence in the Northern Territory comfortably outshining that of all other states and territories.
Against overall negative readings on the index for expectations regarding economic growth nationwide, NT scores just above positive 80 (out of a highest possible score of positive 100) – more than twice the next best performing state of Western Australia.
Sentiment regarding the 12-month outlook for capital growth in the commercial, housing, and industrial sectors stand at four, three and two times national averages respectively while that regarding property construction activity, staffing levels and property industry participant estimates of their own forward work schedules stand at seven times, three times and twice national averages.
In retail, even as all other states recorded anticipated falls in shopping centre prices, NT registered a score of positive 20 on the index for this sector.
While factors such as the anticipated economic boost from plans for American military personnel and the recent release of the 20-year plan for Darwin are contributing toward the positive sentiment readings, the primary driving force behind the current mood is the $34 billion Ichthys LNG Project, which received the final go-ahead in January.
Below is an analysis of current market conditions in residential construction, commercial property and non-residential construction, engineering construction, and construction industry employment within the territory.
Following a subdued year in 2011, the housing industry in the Northern Territory appears to be back on the rise as the boost from Ichthys starts to feed into increasing levels of residential construction. In the March quarter alone, the Housing Industry Association (HIA) estimates the seasonally adjusted number of new dwelling commencements throughout the territory at 300 – well up from the 240 starts in the December quarter last year and almost double the 160 low recorded as recently as the June quarter in that same year. By the December quarter of this year, the HIA expects this number to climb to 360.
Indeed, over the entire year, the HIA expects the number of starts to come in at 1,320 – the second highest level on record for at least the past eight years. Longer term, as strong economic and employment growth feeds through into more demand for housing, the housing group expects growth in residential construction to continue, with the number of dwelling starts expected to reach 1,370 in 2013 and 1,420 in 2014.
Commercial property/Non-residential construction
The outlook for rents, capital growth and investment returns on commercial property is very strong, with survey participants from the latest Property Council of Australia survey predicting that commercial property will substantially outperform national averages across all sectors (office, industrial, retail, tourism) except for retirement living. Even in retirement living, where NT scored almost positive 10 on the expectations index, survey respondents were optimistic about the outlook – though less so in the NT than for other states.
As of December 31, Darwin’s office vacancy rate of 7.2 per cent was substantially lower than the national average, indicating strong demand for office space throughout the city. Going forward, demand from government and private corporations is set to strengthen further as the impact of Ichthys and other projects starts to take hold.
Outside of the higher quality A and B grade space, however, the Property Council of Australia warns that demand for lesser grade space remains weak and that owners of lesser grade commercial property should give serious consideration to the idea of an upgrade.
In terms of non-residential construction work, the immediate future looks reasonably bright. At $509.6 million, the total value of non-residential building work approved for construction over the six months to February (not seasonally adjusted) throughout the Northern Territory is much higher than the equivalent figure for the previous corresponding period to February 2010 – though the bulk of the difference is the result of a singular project for a new $300 million prison precinct in Darwin. This means that the pace at which new work is coming in has picked up, albeit with a singular project accounting for almost all of the lift.
Following final approval of the $US34 billion Ichthys LNG Project, current market conditions in the engineering construction sector throughout the Northern Territory are extremely strong, with resources, roads and railways all generating high levels of work.
In the current financial year, industry research firm BIS Shrapnel expects the value of work done to double to $1.9 billion. Furthermore, BIS says, with activity expected to surge to $10 billion plus levels over the next three years, the current increase in activity is merely the tip of the iceberg.
In addition to landlords and property developers, workers are also expected to benefit from the oncoming boom in construction. At 12,400, the number of people employed on a full-time basis in the construction sector throughout the NT during the three months to February 2012 (not seasonally adjusted) is already at its highest level on record, according to ABS figures. Going forward, with industry sentiment regarding 12-month staffing expectations at three times the national average, the territory’s construction labour market is expected to strengthen further.