Best areas to invest in Wollongong, Illawarra and the South Coast in 2020

By Craig Gibson

Is Wollongong, the greater Illawarra and the South Coast on your property investment radar in 2020?

You are not alone. 

Regional locations are increasingly seen as a viable alternative to city life as flexible working and remote office become the norm. This means it is not only the holidaymakers, downsizers and retirees who are interested in these markets.

Young families and professionals put off by Sydney’s cost and overcrowding are now looking for a sea change, and moving south to regional centres like Wollongong, which have their own local economy and better quality lifestyles. 

This has made suburbs like Thirroul, approximately 13 kilometres north of Wollongong, much in demand - with some of the highest median house prices in the area at $1.2m million. You can see why, with express trains making Sydney a relatively short commute, and giving the Wollongong property market a much needed boost. 

Let’s start our analysis by looking at how these locations performed in 2019. 

What did the property market in Wollongong, Illawarra and the South Coast look like in 2019?

Wollongong real estate
A rmajor regional centre, Wollongong's real estate market is made up of a diverse range of property types.

Domain’s House Price Report (December 2019) indicates that house prices fell -3.4% in Wollongong over the year (median $700,000), though property values are still up +37.3% over the last 5 years. It is a similar story for other locations in the Illawarra, with Kiama (median $850,000) down -2.0% and Shellharbour (median $595,000) down -5.9% YOY. 

Contrast this with Sydney where values recovered in the second half of the year, to leave houses up +6.8% and units +3%, but where the median house price is $1,142,212, with units at $735,387. 

How can we expect Wollongong, Illawarra and the South Coast real estate market to change in 2020?

QBE’s 2019–2022 Australian Housing Outlook forecasts Wollongong to experience modest price growth through to 2022, and believe that the median house price will grow +6% over this timeframe to $685,000. Overall they feel prices are likely to stabilise and improve in the region over 2020.

"QBE forecasts Wollongong to experience modest price growth through to 2022, and believe that the median house price will grow +6% over this timeframe to $685,000"

Only time will tell how this market will perform in the year ahead, but form has regional areas trailing metro markets when these are on the rise. Regional centres are more likely to experience more modest price gains and falls - so factor this into your investment strategy before you invest. 

Also bear in mind that, unlike capital cities, regional towns and cities are more likely to offer positive cash flow over the long term, while metro postcodes tend to give you better prospects for capital growth.

 
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Best areas to invest in Wollongong, Illawarra and the South Coast in 2020

In terms of specific locations SuburbGrowth.com.au tips Helensburgh, 34 kilometres north of Wollongong, as a growth suburb. It forecasts growth of +28.6% over the next three years. Why? They believe the suburb has, 'sound market fundamentals', which includes affordability coupled with its relative proximity to Sydney.  

Fairy Meadow, 4 km from Wollongong city centre is another suburb to watch. Houses have grown +6.2%, with units up +7.7% over the last five years for medians of $726,500 and $450,000 respectively. You can expect to take around $500 per week in rent for a house and $380 per week for a unit here. 

"34km north of Wollongong, Helensburgh is tipped to see +28.6% growth over the next 3 years"

If prices in beachside suburbs are too rich for your blood then move a suburb over - its an old investors trick that makes sense. 

In Wollongong the suburb of Coniston is a case in point. Here the median property prices is $632,500 for houses and $405,000 for units, and you can expect $470 takings per week from a house and $345 for a unit. House prices have advanced +7.9% over the last five years, with units up +5.5%. 

What should buyers and investors be wary of in Wollongong, Illawarra and the South Coast?

The key with any market is to be diligent with your research and understand the drivers of the local property market. These need to sustain growth in the medium to long term, which could include investments in local infrastructure like road/rail links and job creation projects that are likely to inject cash into the local economy.

This in turn drives demand for housing, which pushes prices up. 

In terms of specific things to be wary of, avoid buying in a blue chip waterfront suburb if you are looking for high growth potential, as these are unlikely to offer this - at least over the short term.

 
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How to identify an area with high growth potential

Shortlist your regional investment properties by identifying suburbs and postcodes where as many of the following factors are present, specifically:

  • Rising property values, preferably stable growth in house prices over a relatively short time frame - typically a few years, though it will depend how long you intend to invest for.

  • A declining days on market (DOM) metric, is a good sign that there is strong demand - as properties don’t list for too long. You do need to research the local market, as DOM varies widely by market and location.

  • Rising rental yields, which details how much income/rent a property could fetch over a timeframe, as a proportion of its value. Rising rental yields are a good sign that there is strong demand for rental accommodation.

  • High clearance rates at auctions, which is detailed as a percentage of the number of properties sold over a week/month.

  • Low vacancy rates indicates there is strong demand for rental property in an area
 

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