The month in review: Wollongong
By Herron Todd White
The Illawarra residential property market has continued its reasonably strong growth through 2016 to date. Local real estate agents are advising that they are generally experiencing good activity with many properties selling above reserve or asking price. Continued record low interest rates combined with a limited supply of properties on the market have contributed to this trend.
The bottom end of the market is seeing continued capital growth, with some tailing off at the top end with fewer listings coming to the market. Units, houses and rural properties are all selling.
Auctions are still the flavour of the day, as it is difficult for agents to price properties in this buoyant market.
Prices in new residential unit complexes in Wollongong are steadying as are those in older developments. We are still cautious about unit prices generally in the CBD and North Wollongong as new units are turned off later this year. Although all are reported sold, it is the re-sale market which may suffer some softening.
Vacant land in the new southern estates of Shell Cove, Flinders, Calderwood and Horsley are also showing appreciable rises in the past six months with generally good take-up.
Many of the new unit complexes are selling off the plan even before any construction has begun. Investors are keen to purchase new units as a result of low interest rates while also benefiting from government incentives.
First home buyers are snapping up vacant parcels in these new estates and also benefiting from low interest rates and government incentives. Overall the fierce competition between investors and first home buyers combined with the low interest rates and the limited supply of properties on the market is driving market prices upward. Sydney buyers are entering the market more and more as they are driven out by the hot house prices in Sydney.
Although confidence is still as high in the market as it was at the beginning of the year, from our conversations with both vendors and purchasers, the sentiment is that the current level of market activity is bound to slow down soon. Some local agents are predicting the market to ease towards the end of the year, despite interest rates remaining low.
Supply in all areas is increasing as tends to occur when confidence is high and this will tend to regulate prices. This will result in more properties on the market, longer selling periods and auction clearance rates declining.
The areas which have seen the most growth are generally those where buyers and lenders should be most cautious. Some areas south of Wollongong have experienced a substantial increase in value over the past 18 to 24 months for instance and may be pegged back in any price correction scenario. As always the top end will be the most susceptible to any slowing in the market. Another sector which has suffered in the past when things turn awry is the beach house. Buyers off-loading the beach house to ensure they can keep up the mortgage payments on the principal residence is a situation we have seen before in this coastal region.
Unemployment is still high in the region with talk that both extractive and manufacturing sectors have some redundancies to go. This will also affect confidence and have an impact on prices.