Authorities haify;">Authorities have confirmed a holiday cottage near Dolphin Point was destroyed by the blaze last night.
Helicopters are waterbombing the fire and crews from surrounding areas have been called in to help protect properties.
Tim Carroll, from the Rural Fire Service (RFS), says strong winds are pushing the fire towards the township of Lake Tabourie, south of Ulladulla.
He says several rural properties are in the path of the fire and if residents choose to leave the area, they should go early.
Mr Carroll says if residents can see smoke and flames, it is probably already too late to leave.
RFS spokesman Matthew Schroder says the wind blowing on the fire ground is averaging about 40 kilometres an hour, with gusts of up to 60 kilometres an hour.
"The fire is still continuing to burn in amongst the properties there so our crews are in there working in behind the homes to ensure those properties are safe," he said.
"There is some wind that is impacting the fire at the moment, so the firefighters are experiencing quite sporadic fire activity as we speak, so they're trying to combat that throughout the day."
The Princes Highway is shut in both directions at Burrill Lake because of the fire.
RFS Assistant Fire Commissioner Rob Rogers says the holiday cottage destroyed last night "couldn't be defended" and the burnt out shell was discovered this morning.
Fingal Bay fire eases
Authorities say a bushfire burning at Fingal Bay, north of Newcastle, no longer poses a threat to properties.
Crews have worked this afternoon to contain a blaze burning through bushland in the Tomaree National Park in the Port Stephens area.
Lower Hunter Superintendent Jason Mckellar says the fire was heading towards properties, but it is now under control.
"What crews have worked on this afternoon is doing a backburn of an... area behind the houses at the back of Fingal Bay," he said.
"[The fire] has burnt out into the national park and met up with the wildfire and taken the intensity out of it.
"Now it will be a process of mopping up and patrolling that area."