The Wollongong property wrap-up.
Sydney property prices have been dominating headlines for years, but 2017 has seen an increased focus further south to Wollongong as prices in Sydney grow further out of reach. The spotlight has been across all sectors, with residential, office and industrial property in Wollongong increasingly on the radar for investors and home-buyers alike.
Over the last 12 months, the Wollongong residential market has seen the greatest increase in house value for all non-capital cities. The median house price is now $730,427 representing a 17.6% increase over the 12 months to May 2017 and the median unit price is $530,170 representing a 13.1% increase over the same period.
Whilst the Wollongong residential market has reached record highs, housing in Wollongong still represents relative good value when compared to Sydney, with prices around 35-40% less than the greater Sydney average. Recent research by CoreLogic outlines how Wollongong has benefited from the affordability constraints in Sydney, with prices being pushed higher as more people seek coastal and lifestyle properties.
KPMG Partner and Demographer Bernard Salt’s analysis further supports this, as outlined in his Illawarra Outlook talk earlier this year. He predicted the region’s population to swell in coming years largely due to two demographics: 30 to 39-year-olds looking for their first home or an affordable family home, and those over the age of 60 looking for a sea change or downshift.
Investors are also increasingly looking to large regional areas such as Wollongong for their next acquisition, attracted by the higher yields on offer. Wollongong achieved total office sales of $58.9 million in 2016, the highest annual sales since 2013. A recent Knight Frank report indicates that 59% of businesses operating in the Wollongong CBD require commercial office space, with the top 3 industry sectors being Professional Services (35%), Healthcare (25%) and financial and insurance services (14%). Demand in the Shared Services sector in Wollongong is expected to continue, with Deloitte reporting salary costs of 85% compared to Sydney and higher retention rates of 95% (versus 75% in Sydney).
The challenge with this expected increase in demand is that A-grade vacancy rates are forecast to drop to below 1% in January 2018. As a result, rents are being put under pressure, something that expected to strengthen investor and developer interest.
Reflecting the confidence in the Wollongong office market, construction will soon commence on the Wollongong CBD’s latest A-grade office building, with over 5,000 square metres looking to become available in mid-2019. The Gateway on Keira commercial development will consist of a 5-storey commercial office building with over 2 levels of secure parking. It will provide future commercial tenants with a central location in the heart of the Wollongong CBD and access to a highly skilled work force.
The Wollongong Industrial market is expected to benefit as the Sydney Industrial market continues to experience supply side challenges. A recent Colliers International report warns that Sydney could run out of industrial land by 2023. The report outlines the rezoning of inner suburban industrial land for new Sydney housing as a key driver, creating strong competition for space for new warehouses and logistics facilities, and encouraging business owners to seek alternative opportunities. In addition to this are the price pressures resulting from record increases in land values. According to CBRE’s Q2 Industrial and Logistics MarketView report, the Sydney industrial market has experienced exceptional price growth with a 40% year-on-year increase. As a result of these various pressures, investors and businesses alike are increasingly looking beyond Sydney.
Knight Frank reports that investor demand for industrial assets in Wollongong looks to remain strong, primarily driven by low interest rate environment, improving economic confidence and higher yields when compared to Sydney. Anecdotal feedback from enquiries flowing into Advantage Wollongong and local property agents’ support this view, with an increase in the number of industrial property enquiries over the past 18 months.
Wollongong is well positioned to capitalise on this demand, particularly from a workforce planning perspective. Still a large sector of the Wollongong economy, the local manufacturing industry employs 11,600 people and produces an output of $8.5 billion. Over 60% manufacturing workers carry a trade certificate or higher, and the University of Wollongong turns out over 600 engineering graduates a year, providing an highly skilled workforce for any businesses looking to relocate here.