By Herron Todd White
October 2019

The Illawarra offers a variety of residential property types that can generate cash flow for an investor owner.

The region has broad pockets of single houses, older and modern unit developments and villa and townhouse developments. Sprinkled throughout are specific investment properties such as duplexes, flat buildings, display homes and boarding houses. In Nowra, there is a large supply of defence housing properties.

We experienced strong capital growth from 2013 through to 2017 and in that time rents also increased, but not anywhere near the same pace. As a result, residential yields compressed. An example is a sale of an eight-unit building in Smith Street, Wollongong. The property sold in November 2018 for $2.23 million with an assessed gross yield of 4.8%. The same property sold again in August 2018 for $2.675 million. The rents for the units had increased but this still represented a gross yield of 4.28%, a decline of 11%.

Recent weakening market conditions have changed the tide for low yields. As prices have declined, yields have started to increase. Small scale and older style multi-unit properties appear to be a favourite of residential investors. Recent transactions include an April sale of five two-bedroom units in West Wollongong for $1.1 million, reflecting a passing gross yield of 6.15%. A single level block of three units in Bellambi sold in May for $695,000 which reflected an analysed gross yield of 5.42%. More unique are sales of modern developments in the Illawarra. The recent sale of

6A Addison Street, Shellharbour is the first one in recent times. This was a three-level, six-unit building built-in 2016. The sale for $2.565 million reflects a gross passing yield of 5.55%.

The most important aspect for a cash flow investor is having their property occupied and the Illawarra caters for a large variety of demand for rental properties.

Speak with a Wollongong Mortgage Broker today.

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