Housing boom hits Katherine

ABC News 12.02.2022 | Roxanne Fitzgerald

While buying a house remains out of reach for many Australians, it’s the much cheaper option in this small Northern Territory town — even if you have no plans to stay long-term.

The discrepancy in rent prices and the cost of buying is even causing a bit of a housing boom in this town. However, things were different just a few years ago.

Key Points

• Low vacancy rates, high rental prices and affordable houses are pushing transient professionals into buying houses
• A $1 billion Tindal air force base upgrade has helped the region’s economy grow
• LJ Hooker’s Wayne Nayda says bidding wars have become commonplace with a complaint filed to Consumer Affairs

Even when successive interest rate cuts and relaxed lending standards resulted in rising property prices across the country, residents in Katherine could barely give their houses away.

But now a swift and sharp turnaround has led to an unusual phenomenon in a highly transient town where it’s almost impossible to secure a rental.

“We haven’t got lovely golden beaches and such,” real estate organisation LJ Hooker’s principal director Wayne Nayda said.

“People usually come up for two-to-three years and just want to rent, but now they are buying,”

In an isolated and remote town that typically finds it difficult to attract and retain young professionals like teachers and GPs, Mr Nayder said the property turnaround was quite unusual.

“Katherine is in a housing boom,” he said.

Vacancy rates have dropped from about 10 per cent to far below 0.1 per cent, agencies say, pushing the rental prices up by about 30 per cent over the last 18 months.

For most of January, real estate sites listed less than 15 rentals, and a plethora of properties for sale ranging from $200,000 to $500,000.

Six months ago, Stewart Crowley was choosing from just four rentals, all equivalent to what he was paying in bayside Melbourne.

Relocating for a high school teaching position with his wife and two children, he had no intention of buying a house and no plans to establish roots for the long-term.

“Our rental subsidy from the government finished and the rent was too much,” he said.

“The only other option really was to purchase a property … and we worked out it was cheaper to buy a house in Katherine than it was to continue renting.”

He says his mortgage repayment is “significantly” cheaper than what he would have to pay if he’d been renting.

Hayley Downes bought a brand new house in a sought after development that’s widening the fringes of Katherine.

Construction workers packed up their tools last week and Ms Downes moved in on Friday.

At just 23, Ms Downes never thought she’d be a homeowner this early. “It was a big decision, you could definitely say that,” Ms Downes said.

“But last year there were a lot of incentives, including the first home buyers grant. The government was basically giving away money for free and interest rates were really low.”

Ms Downes said she spent months sifting through rentals out of her price range and “too expensive for what they were worth”, after payments on a two-bedroom unit she was living in with her partner rose from $500 per week to more than $600.

Buying new, she said, worked out cheaper with her mortgage repayment coming to just $500 a week.

“It’s a lot of money to go into debt for, but it’s your own.”

Toxic chemicals impacts ‘done and dusted’

In 2019, house prices in Katherine slid 16 per cent, financial services company CoreLogic detailed in its June report on housing markets.

A landmark class action had been formally filed against the Australian government over PFAS contamination, with Katherine residents arguing their property values had plummeted — some even said their houses were unsaleable.

But according to Mr Nayda, “that’s all done and dusted”.

“We had a bit of a fright with PFAS … but at the moment the rental market is excellent. If you asked me the same question eight months ago I would have said it was in dire straights,” he said.

“Interest rates are low, house prices are still reasonably low in Katherine — they haven’t peaked yet — and rentals are obviously going up – it makes it very attractive for an investment.”

Jobs behind the housing boom

At the beginning of 2020, Prime Minister Scott Morrison jetted into Katherine and announced $1.1 billion dollars in upgrades on the outskirts of town at the Tindal RAAF Base.

The work includes facilities for Australia’s new US-made F-35 strike fighters.

This, according to Mr Nayda, was the start of the housing boom.

All of a sudden, massive companies needed somewhere to home their contractors to carry out the work, Mr Nayda said.

“We had to tell them, ‘Sorry, we have no more rentals left … but look at the market, find a cheaper house, and you’ll probably find out in the end it will be cheaper for you to buy it,'” Mr Nayda said.

He said they started snapping them up.

After 23 years in the real estate industry, peaks and troughs in Katherine’s housing market have become all too familiar to Alison Ross, Principal for Elders Real Estate Katherine.

She said the shift in the property market was something that hadn’t been seen in quite a few years, with COVID-19 and an influx of projects as the critical factors.

While COVID-19 crushed almost all thoughts of travelling, many people saw their savings grow much faster than anticipated.

And even though house prices have skyrocketed in most pockets of Australia, Ms Ross said entering the market in Katherine was still achievable, with prices starting at $200,000 to $300,000.

Ms Ross said economic development in the region and jobs had brought people to town.

“Rents have skyrocketed, and a few government agencies are no longer providing rental subsidies,” she said.

“And so those people have to be self-sufficient and are saying, ‘Let’s just go and buy something. It’s always a good stable rental return, so whilst we can buy something when we’re moving here, we’ve always got that rental option when we leave.'”

‘We’re getting into a bidding war’

In a market where inventory is low, Mr Nayda said “bidding wars” had become commonplace.

Mr Nayda said a complaint had been filed to Consumer Affairs about some agencies advertising “make an offer”,  which he said could supercharge the market.

“We have agencies outside of Katherine who have seen an opportunity to make a quid, getting in contact with owners and spiking the rents or doing rent bidding,” he said.

While frowned upon in the Northern Territory, rent bidding isn’t illegal.

However, Consumer Affairs said “property agents and landlords must not mislead or deceive prospective tenants”, nor list a property without a price.

Agencies are optimistic about the future

Nationally, property values grew 22 per cent in 2021 and are expected to rise again this year, before falling in 2023.

But Alison Ross is optimistic she will be busy with clients snapping up houses for a number of years to come – especially new houses, as long as builders are available and they can get their hands on materials.

“Rents have gone through the roof and we should have been planning and forecasting years ago,” she said.

“A lot of people are coming here for work.

“They might be single people that are out of university or just want a small unit to rent or purchase and that’s what we need to be building – which hasn’t happened.”

Read More

• 2021 / 2022 Katherine Property Market Update
• Katherine Times: Calls for more affordable housing in Katherine
• Elders sets new record: Highest Sold Price for a house in Katherine

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