Illawarra Shoalhaven Region – What’s Happening in the Housing Market?

The Illawarra Shoalhaven region includes four local government areas to the south of Sydney on the coast, including the city of Wollongong and significant regional centres. While there are differences across the region in median rent and house prices and rent and house price growth, there has been a reduction in rental affordability in every LGA in the region and a loss of affordable rental housing and an increase in the number of low income rental households in housing stress.

Illawarra Shoalhaven Region – What’s Happening in the Housing Market?Housing Market - Rental

Rents There have been strong increases in median rents in all bedroom categories in

the Illawarra Shoalhaven region for over a decade, but this trend has recently reversed or at least slowed pace in some markets, as the graph below demonstrates.

Note that data for Shoalhaven for 2015-16 was not available in FACS Rent and

Sales reports.

www.facs.nsw.gov.au

At June 2019, median rents for houses were highest in Kiama at $550 per week, followed by Wollongong at $500 per week, Shellharbour at $490 and Shoalhaven at $390. Kiama had the largest increase in median rent for houses over the period from 2008 to 2019, followed by Wollongong.

Median rents for units at June 2019 were highest in Kiama at $435 per week, followed by Wollongong at $365 per week, Shellharbour at $340 and Shoalhaven at $295. Shellharbour has had the strongest increase in median rents for flats over the period from 2008 to 2019, followed by Kiama and Shoalhaven.

The two tables below show the change in median rents for houses and for flats between June 2008 and June 2019 in each of the Illawarra Shoalhaven LGAs.

Median Rent - HousesLocal Government Area June 2008 June 2019 Change % ChangeKIAMA $320 $550 $230 71.9SHELLHARBOUR $300 $490 $190 63.3SHOALHAVEN $240 $390 $150 62.5WOLLONGONG $300 $500 $200 66.7

Median Rent - FlatsLocal Government Area June 2008 June 2019 Change % ChangeKIAMA $250 $435 $185 74.0SHELLHARBOUR $180 $340 $160 88.9SHOALHAVEN $170 $295 $125 73.5WOLLONGONG $230 $365 $135 58.7

The table below shows the proportionate change in rents for all units, and for one, two, three and four or more bedroom dwellings in each of the Illawarra Shoalhaven region LGAs between March 2018 and March 2019. Note that Shoalhaven experienced the strongest increase in median rents for units and four bedroom homes, Wollongong for one bedroom homes and Kiama for two bedroom homes over this 12 month period.

% change March 2018 – March 2019 Units 1 bed 2 bed 3 bed 4 bed

Kiama 3.85 - 4.82 -5.45 0

Shellharbour 3.03 - -1.28 0 0

Shoalhaven 5.36 - 3.23 0 0.53

Wollongong -2.56 6.54 0 0.51 -2.33

Note there were insufficient studio dwellings to ascertain the median rent.

www.facs.nsw.gov.au

Rentals for units and larger houses in Wollongong, 2 bedroom houses in Shellharbour and 3 bedroom houses in Kiama showed a decline, whilst rentals in other markets showed an increase.

Any decrease in rents would benefit renters and improve rental affordability.

Vacancy Rate A vacancy rate of 3% is understood to represent a balance between supply and

demand. According to REINSW data, vacancy rates were below 3% for the Wollongong and the Illawarra (and Sydney) for almost all the whole period from 2007 through to 2018. For much of that time the vacancy rate has been below 2% - indicating a chronic shortage. While more recently, from 2018 to 2019 vacancy rates for Wollongong and the Illawarra have eased slightly, they are still below 3%.

At September 2019 the vacancy rate in Wollongong was 2.8%, in the rest of the Illawarra it was just 1.5% and in Sydney it was 2.9%.

Affordable Rental The graph below shows the change in the proportion of private rental

accommodation affordable to very low income households in the Illawarra Shoalhaven LGAs, Sydney and Rest of NSW between 2011 and 2017.

www.facs.nsw.gov.au

The general trend across Sydney and NSW has been for a decline in the proportion of rental stock which is affordable for very low, low and moderate income earners. Although this region is more affordable than Sydney, the reduction in the proportion of rental housing that is affordable has been significant.

All the Illawarra Shoalhaven LGAs have a much lower proportion of rental affordable for very low income households than the Rest of NSW average of 23.1%, with Kiama 0.6%, Shellharbour 1.1%, Shoalhaven 10.8% and Wollongong 7.5% at September 2017. At that time, Kiama and Shellharbour had a lower proportion of affordable rentals than the average for Greater Sydney which was 3.9%.

The proportion of rental affordable for low income households has also declined in the Illawarra Shoalhaven region, with all LGAs below the average for the Rest of NSW of 54.1% (with 10.1% in Kiama, 13.9% in Shellharbour, 26.8% in Wollongong and 47.1% in Shoalhaven in September 2017).

Given the predominance of low income households in the Illawarra Shoalhaven region, the declining proportion of private rental accommodation affordable for lower income earners is of concern.

This suggests a growing gap between demand and supply, which is borne out by other evidence in the graph below, which shows the change in the proportion of private rental accommodation that is affordable for very low income households in the Illawarra Shoalhaven LGAs and the Rest of NSW generally between 2011 and 2017 (the data is for June of each year, and September in 2017).

www.facs.nsw.gov.au

There has been a similar decline in rental affordability for low income households in the region, as illustrated in the graph below:

There is evidence that short term holiday rentals such as Airbnb are impacting the supply of housing, including long term rental and affordable housing in cities and coastal communities. The North Coast sub-region and Byron Shire in particular has experienced significant impacts, including loss of long term and affordable rental housing.

The University of Sydney Urban Housing Lab undertook a study and prepared a report for the Australian Coastal Councils on short term holiday rentals: “Planning responses to online short term holiday rental platforms” - Research Project for Australian Coastal Councils Association Inc. September 2018 by Nicole Gurran, Yuting Zhang, Pranita Shrestha, Catherine Gilbert.

The study found (p7) “that there has been a rapid growth in online holiday rental listings overall and in coastal Australia in particular. Since Airbnb was launched in Australia, the number of listings has risen to over 130,000 properties, amounting to around 0.2% of the housing stock nationwide. If holiday rentals are considered to be part of the rental housing stock (a smaller proportion of Australian homes), then Airbnb listings for whole homes represent around 3.5% of rental accommodation. In coastal communities, the rate is much higher. Across the communities in this study, between 0.3% (Moreton Bay) and 17.6 % (Byron) of the total housing stock is listed on Airbnb.”

Further (p7) “ the majority of these listings are whole houses, and more than half appear to be frequently available holiday lets rather than permanent residences. Considered as part of the rental housing stock, these whole houses, frequently available, amount to 19.7% of the rental housing stock in Kiama…” and (p23)

www.facs.nsw.gov.au

21.6% in Shoalhaven. The report states that (p23) “Airbnb listings…is equivalent to around a fifth of the rental housing stock in Kiama (and) Shoalhaven…”

The study notes that (p25) “There has been rapid growth in Airbnb listings across many of the 12 case study communities, particularly between December 2016 and December 2017…Listings grew fivefold in Shoalhaven…”

While Kiama and Shoalhaven are traditional tourist destinations, the rapid growth in on line listings and loss of affordable rental accommodation are likely connected, with tourist accommodation outcompeting longer term renting for locals, particularly in Kiama. Shellharbour and Wollongong did not participate in this study, so the impact of Airbnb on those LGAs is not known. However, it offers a partial explanation for the loss of low income rental households in the region.

Rental Stress All Illawarra Shoalhaven region LGAs have high levels of very low income

households in rental stress, comparable to the Rest of NSW and Greater Sydney (ranging from 91% in Shoalhaven to 96% in Wollongong and Shellharbour).

In addition, all but Shoalhaven have higher levels of low income households in rental stress than the average of 65% for the Rest of NSW (ranging from 61% in Shoalhaven to 81% in Kiama).

At the 2016 Census there were 11,360 very low and low income renters in housing stress across the subregion, increasing from 10,845 in 2011. This increase in low income households in rental stress is in spite of the decline in low income rental households across the region.

The graph below shows the proportion of both very low and low income households in rental stress in the Illawarra Shoalhaven LGAs and the Rest of NSW at the 2016 Census.

www.facs.nsw.gov.au

The table below shows the number and proportion of tenants in the Illawarra Shoalhaven region who are in the private rental market, are in receipt of Commonwealth Rent Assistance, and even with this additional income support, are in housing stress. Wollongong, Kiama and Shellharbour have a higher proportion of CRA recipients in housing stress than the average for the Rest of NSW.

Area % in Stress in

2012

% in Stress in

2016

Total CRA recipients

2016

CRA recipients in

Housing Stress 2016

Kiama 39.4% 43% 859 373

Shellharbour 34.6% 40% 3,960 1,603

Shoalhaven 28.0% 32% 8,275 2,615

Wollongong 41.2% 47% 13,142 6,132

Rest of NSW 32.4% 35% 201,580 70,760

Loss of Affordable Housing Stock

www.facs.nsw.gov.au

DCJ has calculated the number of new bonds lodged with the Rental Bond Board that were affordable to low income earners in Kiama, Shellharbour, Shoalhaven and Wollongong in 2006, 2010, 2013 and 2017. All Illawarra Shoalhaven region local government areas experienced a significant decline in affordable bonds lodged, and consequently loss of affordable housing between 2006 and 2017 – with Wollongong having 1,839 fewer affordable bonds lodged – representing a loss of 80.6% of affordable stock; Shoalhaven lost 69.1%; Shellharbour lost 80.6% of affordable rental bonds lodged; and Kiama lost 80.2%. These are significant losses. Kiama in particular had very few affordable private rental bonds lodged in 2017. The sheer number of affordable rentals lost in Wollongong in particular but also Shoalhaven are alarming, particularly given that historically these two LGAs have been a little more affordable, particularly in comparison with Sydney.

The table below shows the number of bonds lodged that were affordable to low income households in 2006, 2010 and 2017 in Kiama, Shellharbour, Wollongong and Shoalhaven.

No. of affordable rental properties for low income households

LGA 2006 2010 2013 2017

KIAMA 81 33 17 16

SHELLHARBOUR 340 190 113 66

SHOALHAVEN 1,244 627 524 384

WOLLONGONG 2,312 1,079 903 473

Housing Market - Purchase

Sales Price In the period from 2008 to 2017 house and strata prices rose strongly. However

more recently, house prices showed a decline, with the median price for all housing (strata plus non strata) dropping by 10.78% in Kiama, 2.38% in Shellharbour, 1.82% in Shoalhaven and 2.5% in Wollongong from December 2017 to December 2018.

www.facs.nsw.gov.au

The following graphs presenting the long term median sales price trend for houses and for strata properties show that there has been a significant increase in the sales price of both since 1994 in all four Illawarra Shoalhaven region LGAs up until 2017, when a decline set in and prices dropped for houses (non-strata) during 2018. The pattern for strata properties shows a similar trend, with price drops in Wollongong and Shellharbour and a slowdown in increases in Shoalhaven, though prices for strata units in Kiama continued to increase.

www.facs.nsw.gov.au

At June 2019, the median sales price for houses in Kiama was $833,000, in Wollongong was $678,000, in Shellharbour was $630,000 and in Shoalhaven was $560,000.

The median sales price for strata properties at June 2019 was $635,000 in Wollongong, $610,000 in Kiama, $490,000 in Shellharbour and $403,000 in Shoalhaven.

The table below gives the change in median sales price for houses, strata properties and all dwellings between June 2018 and June 2019 for each of the Illawarra Shoalhaven region local government areas.

Local Government Areas (LGAs)

House/ Unit/ All Dwellings

June 2018 Median Sales Price$'000s

June 2019 median sales price

Change over 12 months

% change

Kiama Non Strata 975 833 -142 -15%Kiama Strata 606 610 4 1%Kiama Total 920 773 -147 -16%

Shellharbour Non Strata 639 630 -9 -1%

Shellharbour Strata 526 490 -36 -7%Shellharbour Total 619 600 -19 -3%

www.facs.nsw.gov.au

Shoalhaven Non Strata 560 560 0 0%Shoalhaven Strata 388 403 15 4%Shoalhaven Total 550 540 -10 -2%Wollongong Non Strata 755 678 -77 -10%Wollongong Strata 585 635 50 9%Wollongong Total 685 635 -50 -7%

Purchase Affordability In all four of the Illawarra Shoalhaven region LGAs, purchase affordability for very

low income earners has been between 0% and 1% from 2011 to 2017, well below the level for the Rest of NSW, as the graph below demonstrates, though there has been a very slight improvement in from 2016 onwards. Interest rates are currently at record low levels which has contributed to the recent improvement in affordability. This graph shows purchase affordability for very low income households in Kiama, Shellharbour, Shoalhaven, Wollongong and the Rest of NSW between 2011 and 2017.

At June 2017, 1.7% of properties in Kiama were theoretically affordable for purchase by low income households, 2.2% in Shellharbour, 2.5% in Wollongong

www.facs.nsw.gov.au

and 7.4% in Shoalhaven, all well below the low 24.7% average in the Rest of NSW. There has been a slight improvement since 2016 in Shoalhaven, but affordability continued to decline in the rest of the Illawarra Shoalhaven.

The graph below shows the change in purchase affordability for low income households in the Illawarra Shoalhaven LGAs and Rest of NSW between 2011 and 2017.

Purchase affordability for low income households is also very low in this region, with Kiama, Wollongong and Shellharbour showing levels of affordability even lower than Greater Sydney in 2017.

Additional DataAdditional data on rents and sale prices, including both current and historical data, is available from the Rent and Sales Report on the Housing NSW website at:

http://www.housing.nsw.gov.au/About+Us/Reports+Plans+and+Papers/Rent+and+Sales+Reports/

More detailed housing data and tables used in this Snapshot are available from the Local Government Housing Kit Database on the Housing NSW website at:

http://www.housing.nsw.gov.au/Centre+For+Affordable+Housing/NSW+Local+Government+Housing+Kit/Local+Government+Housing+Kit+Database/

www.facs.nsw.gov.au

More information on vacancy rates is available from the Real Estate Institute of NSW website (see their media releases on vacancy rates):

https://www.reinsw.com.au/

www.facs.nsw.gov.au