The next frontier: Why this overlooked Newcastle suburb is on the cusp of rezoning

Merewether Heights, the quiet hillside suburb wedged between the coast and the heavy rail corridor, is about to become Newcastle’s next property battleground. Newcastle City Council is preparing to lodge a formal rezoning application with the Department of Planning, Housing and Infrastructure before the end of the year, a move that could see vacant and under-utilised land along Scenic Drive and the old quarry site behind the Merewether Golf Club redesignated for medium-density housing.

The rezoning proposal matters because it would be the first major land-use change in the suburb since the 2005 local environmental plan. Newcastle’s median house price has hovered around $720,000 for the past 12 months, according to CoreLogic data provided to The Daily Newcastle, but Merewether Heights has tracked above that at roughly $810,000. The gap has narrowed as Sydney overflow buyers pushed into the region; the suburb now sees a higher proportion of out-of-town queries than any other postcode in the city, according to agents at Belle Property Newcastle East.

What’s on the table

The rezoning area covers roughly 22 hectares, much of it bushland and former industrial lots that have sat idle for two decades. The council’s planning team has identified three specific sites: the 4.5-hectare parcel adjacent to the Merewether Bowling Club on Scenic Drive, the old brickworks site on Carrington Street, and a strip of council-owned land behind the golf course that runs up to the Pacific Highway edge. Under the proposed zoning, those sites would be reclassified from low-density R2 to medium-density R3, allowing townhouses, duplexes and small apartment blocks of up to three storeys.

The timing is driven by the state government’s new Housing SEPP, which took effect in March this year and mandates that councils must rezone land to meet locally identified housing targets. Newcastle’s target, set by the Department of Planning, calls for an additional 8,500 dwellings by 2030. Merewether Heights, with its proximity to the Junction shops and the newly upgraded bus rapid-transit stop on Glebe Road, is seen as a logical infill location.

Local detail and investor context

The suburb lacks a primary school or a major retail strip, which has historically kept it off the radar for families and first-home buyers. Instead, it relies on the nearby Darby Street café precinct and the Marketsquare shopping centre at the Junction. But the planned rezoning could change that calculus. Barry Plant Newcastle, an agency with a strong presence in the area, reported a 15 per cent increase in enquiries from investors since the council’s first rezoning workshop in February. The agency’s principal, who asked not to be named, said buyers are eyeing older three-bedroom brick homes on blocks of 600 square metres or more, which are still available for under $750,000.

The broader Newcastle market is showing signs of strain. Melbourne auctions are headed for their worst slump since the Covid pandemic, according to a recent report from realestate.com.au, and South Australia has seen first-home buyer demand drop as affordability worsens. Newcastle has not been immune-stock levels on the market rose 12 per cent in June compared with the same month last year, according to SQM Research-but the city’s status as a regional hub continues to draw buyers priced out of Sydney. The rezoning in Merewether Heights could be the catalyst that shifts investor attention from the already-booming Islington and Mayfield precincts, where median prices have risen roughly 30 per cent over five years, toward a still-affordable pocket of the city.

For buyers, the window is narrowing. The council plans to submit its final rezoning application in November 2026, with approvals expected by early 2027. Once the zoning changes take effect, land values in the affected strip are likely to jump, as has been seen in comparable infill suburbs such as Adamstown and Hamilton South after similar rezonings. The Daily Newcastle understands that at least two development consortia have already approached the council about pre-application meetings for sites in the Scenic Drive corridor. Anyone waiting for the perfect moment to enter the Merewether Heights market should probably stop waiting.

This article is general information only and is not personal financial or investment advice. Consider your own circumstances and seek licensed professional advice before making financial decisions.