gss,
I've just settled on a second property at Lemon Tree Passage. Bought my first one there in 2001 and prices have just about doubled in that time. You won't find anything under $200,000 now but 2 years ago there were 3 bed brick houses close to the water for around $100K-$130K.
Prices are still pretty good compared to surrounding areas, and there's rumours of a new ferry service from Nelson Bay, and possibly a restaurant opening there soon.
I agree with brains about there still being good future price growth, especially with the land shortage on the Tomaree Peninsula where people are being priced out of the market and forced to move slightly further out, bringing more people to the area.