The Illawarra and Shoalhaven is at a "crisis point", as the region faces a rapidly decreasing supply of serviced land for development.
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That's according to a new report, which also says the critical shortage of greenfield housing extends throughout the region and is having a major impact on "deteriorating" housing affordability.
The Urban Development Institute of Australia (UDIA) NSW, which represents property developers, recently outlined these concerns in its Building Blocks Illawarra Shoalhaven 2021 report.
The report notes that while lots have been released in West Lake Illawarra and apartment development in the Wollongong CBD and Kiama township, the pace of development is not keeping up with demand, leading to a critical shortage of greenfield housing throughout the region.
It's also believed this demand will only be exacerbated by the rate of people looking for regional housing solutions out of Sydney.
The report says this is supported by the UDIA/URBIS Home Purchaser Sentiment Survey, whereby 33 per cent of Sydney respondents indicated an interest in moving outward, whether to outer suburbs or to the regions.
"House prices are continuing to climb at an alarming rate, which is having a major impact on deteriorating housing affordability." Steve Mann, CEO of UDIA NSW said.
"Over the past 12 months, we have seen house prices rise by more than 20 per cent in the Shoalhaven and 12 per cent in Wollongong.
"Kiama now has an average house price of $1 million.
"House sales have seen up to a 50 per cent lift beyond market expectations and we are well ahead of projected lot releases.
"This is the result of a combination of factors including record low interest rates, regional migration, government home purchase incentives and COVID-19 induced demand for space."
Developer Graham Morcom of White Constructions completed both stages of the 200-lot Cedar Grove Estate subdivision at Kiama.
Mr Morcom said demand to live in areas like Kiama was at a high, but there was little to no supply, meaning prices had drastically increased.
"In 2017, we sold a 300 square metre block for $295,000, and it was re-sold last week in Cedar Grove stage two for $680,000," he said.
Mr Morcom said he was concerned that there wasn't enough serviceable land for development "anywhere in the Illawarra".
"They really need to zone more land... The state government has to release more land," he said.
"The only way to fix the problem is to release more land to get the prices down, and give people more options."
Mr Morcom's proposal for a 450-lot housing estate in South Kiama was rejected by Kiama councillors earlier this year.
After an appeal process, the NSW Department of Planning, Industry and Environment has since become the approval authority for the project.
Kiama Mayor Mark Honey said reasons for rejecting the proposal included that it would cause considerable traffic congestion in the area, a lack of commercial component including a supermarket, and councillors having concerns regarding the sewage and stormwater capacity.
Cr Honey said there was little serviceable land for development available within the LGA, but the focus for any future land development for council would be in the old Bombo Quarry area.
However, he noted council had little control over when that might become available as the land was owned by the state government, Boral and Cleary Bros.
Calls for more infrastructure funding
The report says this "crisis" can be averted through the funding of "critical enabling infrastructure" needed to further support up to 500,000 people that will live in the region by 2041.
The UDIA requests the NSW Government commits $136.6 million for the six recommended water and sewer projects they say will unblock 11,600 lots by 2024 in the West Lake Illawarra and Nowra-Bomaderry Urban Release Areas.
According to the report, West Lake Illawarra is the primary Urban Release Area in the Illawarra/Shoalhaven region and is proposed for 20,000 dwellings, or 60 per cent of the total 30,000 new houses to be provided in the region by 2041.
There are still large areas of unzoned land at West Lake Illawarra, including Calderwood, Cleveland, and Avondale.
"We have focused on the enabling infrastructure required to support zoned areas at Yallah Marshall Mount, North Macquarie and Tullimbar, which can result in greenfield housing being released in a three-year time frame," the report said.