The Illawarra Property Market for May 2025

The Illawarra property market demonstrated continued resilience in May 2025, maintaining its trajectory of outperforming national averages despite broader economic headwinds. While comprehensive May-specific data remains limited, available indicators suggest the region continues to benefit from its strategic positioning as a more affordable alternative to Sydney's premium market, with auction activity showing mixed results and underlying demand fundamentals remaining relatively strong. The market appears to be transitioning into a more normalised growth phase following the pandemic-driven surge, with median house prices reaching $1.26 million in early 2025. The region continues to attract buyers seeking lifestyle benefits combined with comparative affordability.

Market Performance Overview

The Illawarra region entered May 2025 from a position of relative strength compared to national trends. According to the most recent CoreLogic data available, regional NSW markets, which include the Illawarra, showed continued momentum with combined regional areas recording a 0.6% monthly increase and 1.5% quarterly growth as of April 20254. This performance significantly exceeded the national average of 0.3% monthly growth, reinforcing the region's status as an outperformer in the Australian property landscape4.

The region's resilience stems from fundamental demand drivers that have sustained interest throughout 2024 and into 2025. CoreLogic research head Eliza Owen noted that the Illawarra was "bucking the national trend" with double the growth of national markets, experiencing a 2.1% rise in values during the September 2024 quarter when national markets only achieved 1% growth 2. This outperformance pattern appears to have continued into 2025, with the region maintaining what analysts describe as a "more normalised" growth cycle compared to the extreme volatility experienced during the pandemic period 2.

Early 2025 data indicated that median house prices in the Wollongong area reached $1.26 million, representing a 6% increase from the previous year1. This growth trajectory was driven by premium coastal suburbs such as Coledale and Wombarra, which have become increasingly attractive to buyers seeking lifestyle properties within commuting distance of Sydney1. The sustained price appreciation reflects the region's ability to attract both investors and owner-occupiers despite broader affordability challenges affecting the Australian housing market.

Suburb-Level Performance Analysis

Top Performing Areas

The suburb-level analysis reveals significant variation in performance across the Illawarra region during the 12-month period leading up to May 2025. Among house markets, Fairy Meadow emerged as the standout performer with a remarkable 7.78% price increase, followed by Wongawilli at 6.99% and Koonawarra at 6.31%1. These suburbs demonstrate the market's preference for locations that offer either lifestyle amenities or development potential, with Fairy Meadow's proximity to the University of Wollongong and established infrastructure contributing to its strong performance.

Coledale, which recorded a 6.12% increase, continues to attract premium buyers seeking coastal lifestyle properties, while Unanderra's 5.99% growth reflects the ongoing gentrification of traditionally more affordable areas1. The performance of these suburbs indicates that buyer demand remains concentrated in areas offering either lifestyle benefits or perceived value opportunities, with price growth reflecting both organic demand and constrained supply conditions.

In the unit market, North Wollongong led performance with a 2.67% increase, followed by Thirroul at 2.56% and Corrimal at 2.53%1. The more modest growth rates in the unit sector compared to houses reflect ongoing buyer preferences for larger properties with outdoor space, a trend that intensified during the pandemic and appears to have persisted into 2025. Woonona and Mangerton both recorded 2.25% growth, indicating steady demand across different unit market segments1.

Underperforming Markets

Conversely, several suburbs experienced more modest growth or relative underperformance during the period. In the house market, Bulli recorded the lowest growth at just 1.33%, followed by Austinmer at 2.83% and Thirroul at 2.97%1. While these figures still represent positive growth, they significantly lag the broader regional performance, suggesting localised factors affecting demand or supply dynamics in these areas.

The unit market showed more pronounced weakness, with Fairy Meadow experiencing a 3.21% decline and West Wollongong dropping 3.06%1. Bellambi, Helensburgh, and Coniston also recorded negative or minimal growth, indicating potential oversupply conditions or changing buyer preferences in these specific unit markets1. These variations highlight the importance of micro-market analysis when evaluating investment opportunities within the broader Illawarra region.

Auction Market Activity

May 2025 Auction Performance

Auction activity in May 2025 provides insight into immediate market sentiment and buyer confidence levels. The most recent data available for the week ending May 25, 2025, shows regional NSW auction markets achieving a clearance rate of 38.6%, significantly below Sydney's 52.2% but reflecting the different market dynamics in regional areas3. Out of 233 scheduled auctions in regional NSW, 57 properties sold at auction, with an additional 33 selling prior to the scheduled auction date3.

The auction data reveals several important trends affecting the Illawarra market. The relatively low clearance rate of 38.6% suggests that while demand exists, buyers are becoming more selective and price-sensitive3. This pattern aligns with broader economic conditions including elevated interest rates and cost-of-living pressures that are constraining buyer activity across regional markets. The fact that 33 properties sold prior to auction indicates continued underlying demand, with motivated buyers willing to secure properties before competitive bidding situations3.

Post-auction activity showed 12 properties selling after the auction process, while 99 properties were readvertised for private treaty sale3. This significant number of properties moving to private treaty suggests that vendor expectations may not always align with market conditions, requiring more flexible selling strategies to achieve successful outcomes. The auction market dynamics in May 2025 reflect a more balanced market environment compared to the highly competitive conditions experienced during the pandemic period.

Rental Market Dynamics

The Illawarra rental market continued to experience significant pressure throughout the period leading to May 2025, with rental growth substantially exceeding national averages. Data indicates an average rental value increase of 7% across Illawarra suburbs over the 12-month period, representing "pretty high" growth according to CoreLogic analysis2. This rental growth significantly exceeded the national rental index increase of just 0.1% over the September 2024 quarter, highlighting the region's supply and demand imbalances2.

Specific suburbs experienced particularly dramatic rental increases, with Blackbutt recording an 11% increase in house rents and Gerringong achieving an 11.2% increase over the 12-month period2. Even more modest increases, such as the 2.5% growth in Figtree, still exceeded broader national trends2. These rental market pressures reflect the combination of strong population growth, limited new rental supply, and the ongoing appeal of the region to both permanent residents and temporary workers in industries such as healthcare and education.

The rental market dynamics have important implications for both investors and renters in the Illawarra region. For property investors, the strong rental growth provides attractive yield opportunities, with gross rental yields in regional NSW markets averaging 5.0% according to the latest CoreLogic data4. However, the rapid rental increases also contribute to affordability pressures for tenants, potentially creating social and economic challenges that may influence future policy responses and market dynamics.

Economic Context and Market Drivers

Interest Rate Environment

The Reserve Bank of Australia's decision to maintain the official cash rate at 4.10% following its April 1, 2025 meeting continued to influence market conditions throughout May5. The elevated interest rate environment, while showing signs of stabilization, continues to constrain borrowing capacity for many potential buyers, particularly first-home buyers and those with limited deposit savings. This monetary policy stance affects the Illawarra market by limiting the pool of qualified buyers while simultaneously supporting rental demand from those unable to purchase.

The interest rate environment creates a complex dynamic for the Illawarra property market. While higher rates constrain demand from leveraged buyers, they also limit new housing supply by increasing development costs and reducing project feasibility. This supply constraint can support price stability and growth in established markets like the Illawarra, where existing housing stock benefits from reduced competition from new developments.

Regional Migration Patterns

The Illawarra region continues to benefit from migration patterns established during the pandemic period, with buyers seeking lifestyle properties outside metropolitan Sydney. The region's appeal stems from its combination of coastal amenities, established infrastructure, and relative affordability compared to Sydney's median house value of $1.4 million2. This price differential of approximately $300,000 makes the Illawarra attractive to Sydney-based buyers seeking to upgrade their housing while maintaining reasonable commuting options.

Population growth remains a key driver of housing demand, with the region attracting both permanent residents and temporary workers across various industries. The presence of the University of Wollongong, major healthcare facilities, and industrial employers provides employment diversity that supports sustained housing demand. CoreLogic reported sales volumes across the region reaching 5,500 over the 12-month period, up from 4,500 the previous year, indicating robust transaction activity despite challenging market conditions.

Future Market Outlook

Short-term Projections

Market analysts predict continued growth for the Illawarra region, albeit at a more moderated pace than experienced during the pandemic surge. The combination of sustained underlying demand, constrained supply, and the region's comparative affordability position suggests continued outperformance relative to national averages. However, economic headwinds including high cost of living pressures, elevated interest rates, and broader affordability constraints are expected to moderate growth rates compared to the extreme conditions of 2021-2022.

The expectation of increased housing supply coming to market may provide more choice for buyers while potentially moderating price growth. CoreLogic analysis suggests this increased supply reflects demand strength rather than distressed selling, indicating healthy market fundamentals2. The balance between supply and demand will be crucial in determining price trajectories through the remainder of 2025.

Long-term Considerations

The Illawarra's long-term prospects remain positive based on structural factors including population growth, infrastructure investment, and lifestyle appeal. The region's positioning as a satellite market to Sydney provides ongoing demand support, while environmental and planning constraints limit development potential in many coastal areas, supporting price stability. However, affordability challenges may eventually constrain demand growth if price appreciation continues to outpace income growth.

Climate change considerations and environmental sustainability requirements may increasingly influence development patterns and buyer preferences. The region's coastal exposure creates both appeal and risk, with sea-level rise and extreme weather events potentially affecting long-term property values in vulnerable areas. These factors may create divergent performance between inland and coastal properties over time.

Conclusion

The Illawarra property market in May 2025 demonstrated continued resilience and outperformance relative to national trends, despite operating within a challenging economic environment characterized by elevated interest rates and cost-of-living pressures. While comprehensive May-specific data remains limited, available indicators suggest the market maintained its trajectory of moderate but sustained growth, with auction clearance rates reflecting more balanced conditions compared to the competitive pandemic period.

The suburb-level analysis reveals significant performance variation, with premium coastal areas and university-adjacent suburbs continuing to attract strong buyer interest, while some unit markets experienced softening conditions. The rental market remained under significant pressure with 7% average growth across the region, creating attractive opportunities for investors while contributing to broader affordability challenges.

Looking ahead, the Illawarra market appears positioned for continued moderate growth supported by fundamental demand drivers including regional migration, comparative affordability, and lifestyle appeal. However, economic headwinds and affordability constraints suggest a more normalized growth environment compared to the exceptional conditions of recent years. Successful market participants will need to carefully evaluate micro-market conditions and timing while considering both short-term economic factors and long-term structural trends affecting the region's property landscape.