The residential market downturn has meant vacant lots at West Dapto and Calderwood/Tullimbar have taken a significant hit, a new report says.
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According to the report from property valuation and advisory firm Herron Todd White, new residential construction is happening predominantly within the new residential subdivisions in the Illawarra region.
Their residential director for South East NSW Chris McKenna said major subdivisions are located in West Dapto, Calderwood/Tullimbar, Shell Cove and South Nowra.
"The going price for a lot in Shell Cove can be anywhere from $400,000 to $800,000 depending on size, location and proximity to the new marina," he said.
"With the residential market downturn, vacant lots at West Dapto and Calderwood/Tullimbar have taken the biggest hit.
"The current price point for West Dapto is $350,000 for a level 450sqm lot and for Calderwood, is $325,000 for a similar lot. These are down from $425,000 and $400,000 during the peak of the market.
"Oversupply and weaker demand are the contributing factors to the decline in values in these areas and at the current time, the slide is continuing."
Mr McKenna said the competition between project style builders in these locations is high.
Current rates per square metre for the living areas of a new dwelling on a level lot are approximately $1500 to $1750 (excluding external areas and ancillary items).
"Rates vary due to the inclusion of things such as floor coverings, air conditioning and client specific extras," he said.
"Overall build costs for a standard 160sqm four-bedroom, two-bathroom house can be around $325,000 to $375,000.
"Expect costs to be higher if the lot has any sort of a slope as excavation and site costs add additional work for the builder."
Meanwhile, the report also looks at the commercial/retail sector in the Illawarra.
According to the report, strip retail precincts in suburban locations throughout the region have generally remained stagnant for an extended period of time, with yields declining due primarily to the low cost of borrowing, not because of strong fundamentals.
Transactions are generally limited. However, properties at a low price point (less than $2 million) and subject to a strong tenancy profile are attracting healthy buyer interest.
"The village locations of Thirroul, Balgownie, Gwynneville and Shellharbour remain popular for purchasers," the report said.
"The recent sale of 368-370 Lawrence Hargrave Drive, Thirroul for $1.7 million reflected an analysed market yield of 4.67 per cent and a rate of $11,333 per square metre of lettable area."
The report also noted that tenants in this market tend to assess rental affordability on a weekly basis.
"Given the stage of the market, having a long-term strategy, strong lease covenants and identifying value add opportunities will be the important factors for investors moving forward."
