Wollongong May 2017

The month in review: Wollongong

By Herron Todd White
May 2017

There has been strong growth in the Illawarra residential market for a number of years in all locations and property types. In particular, the market is driven by what is happening in Sydney. There is a flow-on effect from Sydney to Wollongong, to the Shoalhaven. Low interest rates, stable employment, improving infrastructure and decreasing affordability in Sydney all combine to create strong demand for residential property at all price levels.

There are a number of factors that could cause the market to change. These include interest rate hikes, an over-supply of new properties, an economic downturn in the region, or a crash in the Sydney market.

Interest rates are currently at record lows and it appears that both owner-occupiers and investors are willing to borrow more and more to fund transactions. Any interest rate hike may cause investors in particular to hold off buying property until it becomes apparent that interest rates are not going to keep increasing. Without as many investors in the market, demand will be lower and competition between buyers will be reduced.

Wollongong is in the midst of a construction boom. In particular, new unit developments are at an all-time high and the supply of new units are at unprecedented levels. In addition, there are many new land developments of varying sizes with the majority being in West Dapto, Calderwood, Shell Cove and South Nowra. As long as the supply is being met by strong demand the market will continue to be strong. However, all this new supply may exaggerate any downturn in the market if developers cannot offload their new stock.

The Illawarra property market is strongly linked to the economic fortunes of the region. The region continues to diversify from its mining and steel roots and has enjoyed good growth in medical and aged care, tertiary education, tourism, and defence sectors. That said, market confidence is still derived from the steel and mining sectors. Any major downturns in these sectors could result in a downturn in the property markets.

With the region being increasingly accessible to Sydney through improved infrastructure, the link between the Sydney and Illawarra property markets is closer than ever. It is likely that the events that would cause a slowdown in the Sydney market would also impact the Illawarra, and if Sydney buyers were removed from the Illawarra market, demand for property would be reduced.

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