Wollongong suburbs led the charge in property value growth in 2025. Photo: Supplied.
Despite a softer finish to the year nationally, Illawarra home values closed 2025 at fresh record highs, underscoring the region’s ongoing appeal as a relatively affordable, lifestyle-driven alternative to Sydney — even as the broader market braces for a more cautious 2026.
Cotality’s December 2025 Home Values Index shows dwelling values across Australia rose 8.6 per cent over the year, the strongest annual growth since 2021. But momentum slowed into December, with the smallest monthly increase in five months and slight declines recorded in Sydney and Melbourne, hinting at a more subdued start to the new year as affordability pressures and renewed interest rate concerns weigh on confidence.
Against that backdrop, the Illawarra delivered a solid, if unspectacular, result. Dwelling values across the region rose 8.2 per cent over 2025, outperforming the broader regional NSW benchmark of 7.4 per cent, but sitting firmly mid-pack compared to other regional markets across the state.
Cotality Head of Research Asia Pacific Tim Lawless said the Illawarra’s relative affordability compared with Sydney remained a key pillar of support heading into 2026.
“With the median dwelling value across the Illawarra ($1,060,515) holding about $220k down on Greater Sydney ($1,280,613), the region is likely to remain a popular location for home buyers looking for more affordable housing options alongside the potential for a lifestyle upgrade,” he said.
“The commutability and liveability, alongside a relative level of affordability compared with Sydney should help to keep some upwards pressure on home values in 2026.”
That pressure is being amplified by tight supply conditions. Listings finished 2025 around 16 per cent lower than a year earlier, while estimated home sales were almost 10 per cent higher, pointing to demand continuing to outstrip available stock.
Illawarra dwelling values reached a new record high in September, marking a full nominal recovery from the 12.5 per cent decline recorded during the early phase of interest rate hikes. Since then, values have climbed a further 2.9 per cent to close the year at new peaks.
Houses again led the market, despite their higher price point. Over 2025, house values rose 8.4 per cent across the region, compared with a 6.9 per cent increase for units — a pattern consistent with buyer preference for space and family-friendly housing.
At a suburb level, the strongest performers were largely clustered around Wollongong, spanning both coastal and inland markets. In Huntley, dwelling values jumped 25.2 per cent over the year, followed by Bulli (up 15 per cent) and Mount Ousley (14.3 per cent). Mr Lawless noted that access to the rail line linking the region to Sydney was a common thread among the top performers, reinforcing the premium placed on commutability.
By contrast, the softest growth was concentrated in the southern Illawarra, with Kiama Downs rising just 4.1 per cent, Gerroa up 1.8 per cent, and Gerringong edging only 1.1 per cent over the year.
“This region did show an extremely strong rate of capital gain through the pandemic, with low affordability and longer travel times likely a key factor in the softer growth conditions,” he said, adding that values across most of these suburbs are still more than 30 per cent higher than pre-COVID levels.
For renters, conditions tightened further. Rents rose another 6.2 per cent over 2025, adding $44 a week to take the median dwelling rent to $757 per week by December. Vacancy rates fell from 1.7 per cent to just 1.2 per cent over the year, with little immediate relief in sight.
Looking ahead, Mr Lawless cautioned that macroeconomic risks could temper growth across 2026, locally and nationally.
“We won’t see the same stimulatory influence of lower interest rates in 2026. In fact, we could see interest rates move higher this year which would dampen housing demand and temper housing sentiment,” he said.
Inflation trends, cash rate decisions and potential credit tightening by regulators will be critical watch points, with Cotality forecasting more modest and uneven growth as buyers increasingly gravitate toward lower and middle price points.
“A further acceleration in investor credit growth could also be a red flag for credit policy in 2026,” Mr Lawless said.
Even so, for the Illawarra, relative affordability and enduring lifestyle appeal continue to set a sturdy foundation as the market navigates a more uncertain year ahead.
