If you are an investor in the Darwin housing market, you might want to sell-up now, because it is facing an almighty bust as the $34 billion Ichthys LNG Project – effectively three mega-projects rolled into one – approaches completion. From Deloitte via The ABC:
“The construction phase of the Ichthys LNG project is due to end in 2016. That means a huge construction cliff is quickly approaching for the Territory,” the report said.
It said that the falls in global oil and gas prices made it tricky for the NT to transition to other areas for development.
“The likelihood that a matchingly large project gets the go ahead to help continue to drive growth once construction on Ichthys begins to wind down is now much less,” it said.
The construction cliff facing Darwin in the wake of the Ichthys LNG project is illustrated in all of its hideous glory in the next chart, which shows the huge run-up in mining capex since the project began in early 2012:
As you can see, capex related to the project shot up from around $850 million (8% of final demand) to a peak of $2,100 million (30% of final demand) in late 2013. While it has fallen a little since then, it still has much further to fall, presenting a massive hit to the Darwin economy and jobs.
Already, Darwin’s housing market is under pressure. After surging following the commencement of the Ichthys LNG project, rents have fallen:
In fact, the latest data from SQM shows that Darwin asking rents are down a whopping 13.7% for houses in the year to 12 April 2015:
Rental vacancies in Darwin have also exploded to the highest capital city level in Australia:
At this stage, Darwin house prices have held-up reasonably well after skyrocketing following the commencement of the commodity boom:
However, with the Darwin economy facing an epic mining investment bust, it’s only a matter of time before house prices plummet.
Sell now!
