House prices will rise nationally by 4.9% over the next 9 months and then surge by 9.4% in the year to June 2025, according to big four accounting firm KPMG.
Apartment prices across the country are forecast to see slower growth rising an average rise of 3.1% by next June, then a 6% increase in the next 12 months.
Now we know how accurate economists' property forecasts have been over the last few years, but this report gained a lot of media attention and that will be good for property sentiment amongst buyers and sellers.
The report details the varied pressures impacting property prices, with a range of push and pull factors countering each other – but with limited supply and high demand ultimately outweighing interest rates.
Forecast of growth in house prices (%, year on year)
(Percentage Change in Dwelling Price from Corresponding Quarter of Previous Year)
| Dec-2023 | Jun-2024 | Dec-2024 | Jun-2025 | |
| Sydney | 6.2% | 4.7% | 6.6% | 10.3% |
| Melbourne | 1.2% | 4.9% | 8.5% | 12.0% |
| Brisbane | 3.7% | 2.8% | 2.6% | 4.2% |
| Adelaide | 6.0% | 5.8% | 5.6% | 6.8% |
| Perth | 8.2% | 8.4% | 8.0% | 8.8% |
| Hobart | -3.5% | 6.0% | 11.3% | 14.2% |
| Darwin | -3.9% | -1.5% | 2.5% | 5.1% |
| Canberra | 1.2% | 4.4% | 7.0% | 9.4% |
| Australia | 4.1% | 4.9% | 6.7% | 9.4% |
Forecast of growth in unit prices (%, year on year)
(Percentage Change in Dwelling Price from Corresponding Quarter of Previous Year)
| Dec-2023 | Jun-2024 | Dec-2024 | Jun-2025 | |
| Sydney | 4.7% | 4.3% | 6.6% | 8.6% |
| Melbourne | -0.8% | 3.1% | 6.2% | 7.0% |
| Brisbane | 2.6% | -0.5% | 1.6% | 3.1% |
| Adelaide | 3.8% | 3.4% | 4.5% | 5.1% |
| Perth | 3.4% | 3.9% | 1.3% | 1.7% |
| Hobart | 2.2% | 8.7% | 9.9% | 10.0% |
| Darwin | -3.3% | 0.8% | 3.2% | 3.1% |
| Canberra | 0.3% | 0.9% | 2.3% | 2.8% |
| Australia | 2.2% | 3.1% | 4.8% | 6.0% |
But there will be important regional differences, with Perth houses rising the highest – by 8.4% – in the rest of FY24 but then Hobart overtaking other cities in FY25 and surging by 14.2%.
Hobart units also outperform all other capital cities with rises of 8.7% and 10% respectively over the next two years, followed by Sydney, Melbourne and Adelaide.
Dr Brendan Rynne, KPMG Chief Economist, said there were a number of factors expected to push up prices
“Despite high interest rates, constrained supply will likely dominate the factors influencing property prices in the short term and result in continued price gains in most markets during FY24.
House and unit prices will then accelerate further in the next financial year as dwelling supply continues to be limited, due to scarcity of available land, falling levels of approvals and slower or more costly construction activity.
The supply issue will combine with several other factors to push assets prices up – higher demand due to heavier migration; anticipated rate cuts moving into FY25, and potentially relaxed lending conditions; high rental costs pushing renters to look to buy instead; barriers to developers building new homes; foreign investor demand picking up again; along with the longer post-pandemic demand for more space as people continue to work from home.”
Rynne also recognised there are headwinds ahead:-
“There are some factors pushing the other way – the main one being mortgage stress.
First-time buyers now need to use around half their earnings on mortgage payments – a significant rise from a third just 3 years ago.
We estimate around $350 billion of mortgages, or half of all fixed-rate credit will expire this year – covering 880,000 Australian households.
The remaining 38 per cent of fixed-rate credit, which includes about 450,000 loan facilities, will expire in 2024 and beyond.
Some homeowners who previously locked in low rates might be unable to pay – and won't be able to refinance to a lower and competitive rate.
Despite this, Dr Rynne said
“But on balance the factors pushing prices up will more than counter those restraining them. Market dynamics vary across different cities so there will be considerable regional variations.”
More home buyers?
High rental costs and low vacancy rates, may make owning a home more appealing to Australians, according to KPMG.
“If renting is more affordable, it can exert downward pressure on housing prices.
When the cost of renting is comparable to the cost of buying and owning a similar property, households may opt for homeownership, potentially driving up house prices.”
Units in Sydney, Melbourne and Hobart are likely to experience larger gains than the national average in the next two years.
The report also outlines that rising rental costs can play a significant role in pushing up dwelling prices, as more renters try for home ownership.
Dr Rynne said:
“Based on our projections for new dwelling completions and the Treasury’s population forecasts, we estimate that annual rent growth will be 5.6% over the next two years – which is 2.5% higher than the long-term average of 3.1%.
We assess that dwelling completions would have to be around 76% higher than is currently forecast for those rental costs to be pulled back to normal levels.
Either that or population growth from migration would have to be brought down to considerably lower levels than at present – which would mean short-term costs over-riding long-term economic benefits.”
