The month in review: Wollongong
By Herron Todd White
The Illawarra, and more particularly Wollongong CBD, is well supplied with medium and high density dwellings including units, villas and townhouses. These include older walk-up 1960s and 1970s red brick blocks, through to modern towers with cutting edge design.
The Wollongong CBD has a high concentration of units which contributes to the vibrancy of the locale, with the university, beach and harbour nearby.
In the year to December 2014, units made up around one-third of all dwellings sold in the Wollongong Statistical District which anecdotally is high for the area, but reflects the amount of new units being turned off by developers.
New units are being designed with larger floor areas, in the range of 90 to 100 square metres for 2-bedroom units and up to around 160 square metres for 3-bedroom dwellings. Larger balconies than the old style 1980s and 1990s units had are also high on the agenda for buyers together with security entry and enclosed garages. Units without adequate outdoor space and with open basement car spaces play second fiddle in the value stakes to those with more contemporary inclusions and features.
Well located 2-bedroom CBD units are presently commanding prices in the high $500,000 to $620,000 mark, and 3-bedroom units in good locations fetch over $800,000 up to $1 million in some cases.
In the northern beaches around Towradgi and Fairy Meadow similar units are selling for slightly less, but there is less modern high rise stock in these areas.
We believe there could be a looming over-supply of new units, either recently completed, underway or planned, within the Wollongong CBD. The demand or take-up of available supply until present has been driven by local purchasers. But more recently, the spill over effect from Sydney purchasers seeking out value, as well as from investors and self managed superannuation funds (SMSF) has put some pressure on prices. The combined effect of a recent retreat by several of the main stream lenders to the SMSF market together with an increase in interest rates could put downward pressure on rental returns and potential stock over-supply.
Strong sale prices for townhouses and villas are evident throughout the Illawarra and Kiama regions and new stock is taken up quickly. This product is an alternative to the standard house on a larger lot and we can see a trend to this type of property as lifestyles change.
Recent developments have seen this method of sale working to the advantage of the developers in this region, something which had abated after the 2008 GFC effects. Some developers have taken stock off the market in anticipation of achieving higher prices once the project is nearing completion.
We rate the best opportunities in the attached housing market as being 3-bedroom, 2-bathroom, 2-garage townhouses in and around urban centres such as Shellharbour in the south and suburbs such as Balgownie, Corrimal and Fairy Meadow in the north, where price points are still low enough for first home buyers or trade-up buyers. It appears that the northern suburbs and to some extent Kiama in the south have passed price points which exclude a great majority of these buyers and we are cautious about future growth.