Some sellers’ expectations remain too high despite the Illawarra’s property market having already peaked, a new report suggests.
Property valuation and advisory company Herron Todd White has released its latest report, which includes a wrap of the nation’s property markets in 2018.
Overall, the report notes that this year, real estate market performance was dominated by both significant events surrounding finance, and price softening in major capitals.
For instance, the report notes that in Sydney, tightening credit has compounded the downturn, with many borrowers not in a position to borrow as much as they could 12 months ago.
According to the report, in 2018 there has been a significant shift in the residential property market throughout the Illawarra.
“The previous year ended with early signs that the tremendous growth experienced for five years had started to slow,” the report states.
“The slowdown continued and became exaggerated as the year progressed.
“As 2018 ends, it has become apparent that the market has peaked and has moved on to the next stage of the property cycle.”
The report says that most segments of the Illawarra market have seen a minor decline in prices, with more significant declines felt in the vacant land market, particularly in the 2527 (Calderwood/Tullimbar/Albion Park area) and 2530 (Dapto/Wongawilli/Marshall Mount/Avondale) postcodes.
“An oversupply of new land and re-sales coming to market has caused the downward pressure on prices as potential purchasers have more than a hundred lots to choose from,” the report said.
Meanwhile, the report indicates that selling periods appear to have increased as less buyers in the market has resulted in it being more difficult to sell.
According to the report, some properties are staying on the market for extended periods where vendors are “not able to renew their expectations in line with the change in the market”.
Pricefinder figures show that the median sale price for a house in the Wollongong LGA declined from $760,000 in the fourth quarter of 2017 to $730,000 in the third quarter of 2018.
In the Shoalhaven LGA, the drop was from $565,000 to $555,000.
The report also said that recently there have been a number of Illawarra properties that have sold at about the same price that they had been purchased for towards the end of 2016.
It cites examples such as a townhouse in Balgownie, which sold in November 2016 for $705,000, and recently sold again for $700,000.
Another example listed was a unit in Atchison Street, Wollongong being sold in September 2016 for $535,000, and recently sold again for $545,000.
Elsewhere, the report also looks at the commercial property sector within the region.
It says that in Southeast NSW (defined in this instance as stretching from Helensburgh and Douglas Park in the north to Sanctuary Point and Crookwell/Bigga in the south), the industrial market has come to life over the past two years after a prolonged period of stagnation post the Global Financial Crisis.
The main drivers of this growth have been major infrastructure projects taking place throughout the state.
“Other drivers of this market are low interest rates, strong conditions in the Sydney industrial market, high confidence in the local economy and activity surrounding the port of Port Kembla,” the report says.
“The relative affordability and availability of industrial land and existing product compared to Sydney combined with the region’s proximity and improving connectivity to Australia’s largest city is making the Illawarra an attractive option for owner-occupiers, while investors continue to chase yield that is absent from the major capital cities.”
Region deemed to be in decline
As Sydney’s property downturn appears set to eclipse that of the early ‘90s recession, the Illawarra market is also in decline.
The Herron Todd White report puts Newcastle in the “starting to decline” section of its “national property clock”.
Sydney, Melbourne and Illawarra are “declining markets”.
CoreLogic’s head of research Cameron Kusher said the latest data for the Illawarra showed a 0.7 per cent fall in property values, to be 3.4 per cent lower over the past three months and 5.9 per cent lower over the past year.
“Values have also been falling for 12 months,” he said of the Illawarra.
“The median dwelling value is recorded at $627,430.
“The cost of housing in Illawarra is fairly similar to that of the outlying areas of Sydney and values have increased rapidly in Illawarra over recent years.
“Given that, it seems unlikely that at this stage a lot of Sydney-siders will move to Illawarra because it is no longer significantly more affordable than the Sydney market.”
Meanwhile, Sydney prices slumped 1.4 per cent last month, according to new CoreLogic figures.
CoreLogic’s head of research Tim Lawless said the Sydney market was feeling the brunt of affordability pressures, a recent ramp up in housing supply and a reduction in foreign buyers.
Mr Lawless said since peaking in July last year, Sydney’s housing market is down 9.5 per cent, which is on track to eclipse the previous record peak-to-trough decline set during the last recession when values fell 9.6 per cent between 1989 and 1991.