Illawarra property values surged up to six per cent in September. Photo: Zoe Cartwright.
The Illawarra housing market is surging into spring, with prices accelerating at their fastest pace in more than a year as buyers compete for a shrinking pool of homes.
New figures from Cotality show dwelling values across the region rose 0.9 per cent in September, bringing quarterly growth to 2.4 per cent — the strongest three-month gain since April last year. The uplift comes as listings tighten, rental markets strain, and first-home buyers are thrown into fiercer competition under an expanded government deposit scheme.
Sales listings across the Illawarra fell from 1560 this time last year to just 1340 in September, putting additional pressure on buyers already navigating a limited supply. The rental market has contracted even more sharply, with advertised properties down from about 1400 a year ago to just 960 last month, sending median rents soaring 30 per cent to $740 a week.
At the same time, the Federal Government’s Home Guarantee Scheme is opening new doors for buyers but also risks pushing prices higher. From 1 October, the scheme’s price cap in the Illawarra jumps from $900,000 to $1.5 million — well above the region’s median dwelling value of just over $1 million.
With only a 5 per cent deposit required under the guarantee, analysts warn the scheme could heat up competition in the mid to high end of the market.
Cotality Australia Head of Research Eliza Owen said the pace of growth in September reflected improving household conditions and renewed confidence.
“Over the course of the month, we’ve seen not just another uplift in home values but a pickup in the pace of growth,” she said.
“In the first eight months of the year, monthly growth averaged half a percentage. That’s ticked up to 0.9 per cent in September for the Illawarra, taking values to 2.4 per cent higher over the September quarter.
“That’s significant because it’s the highest three-month growth rate seen in the market since April last year.”
She said the upswing was supported by rate cuts, easing inflation and a strong jobs market.
“There’s generally been a ramp-up in the region as we come into spring, because households are on better footing now than they were at the start of the year,” she said.
“That comes back to three rate reductions over the course of 2025 to date. While we didn’t see another rate reduction yesterday, three of four banks estimate there could be another rate cut in November.
“There’s also falling inflation, and a tight labour market with employment rates still pretty low, driving up real wage increases. So people are in a better position to accrue savings for transaction costs.
“Consumer sentiment overall is higher. That all supports purchasing activity.”
The gains are uneven across suburbs, with Huntley leading the charge after values rose 6 per cent in the September quarter and nearly 25 per cent in the past year. Russell Vale and Cordeaux Heights also posted strong quarterly growth at 5.5 and 5.3 per cent, respectively. By contrast, Primbee, Gerringong and Lake Illawarra all recorded modest falls over the three months.
Ms Owen said falling rental listings and strong investor prospects could drive further competition into the summer.
“Median rent has gone up 30 per cent year on year. With higher rental income prospects, there could be more investor interest in the market this spring,” she said.
“Considering the median dwelling value in the Illawarra is just over $1 million, the fact that you have the property price cap on the scheme at $1.5 million could actually put upward pressure on a few different segments of the market — even at the relatively high end.”
Cotality has conducted extensive analysis on the implications of the scheme and the 5 per cent deposit.
It found buyers could be paying tens, even hundreds of thousands of dollars more in interest over the lifespan of the loan, depending on its size. However, the decision whether buyers should take it up was still debatable.
“If you’re a renter in the Illawarra, where the average rent is $740 a week, it might still be worth getting into the market sooner rather than later because in some cases, even the additional interest costs could end up being lower than the rent you’ll pay,” Ms Owen said.
