Aussie property values still have room to grow through 2025: KPMG
House prices are set to rise nationally by 5.3 per cent over the next six months, and by another 5.6 per cent over 2025, according to a new report.
KPMG has also forecast that apartment prices across the nation will lift 4.5 per cent by December, and then match house price increases by rising a further 5.6 per cent over the following 12 months.
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Reflecting on the current environment, KMPG chief economist Dr Brendan Rynne said: “In a year of high interest rates, inflation and subdued consumer sentiment the housing market has withstood all those factors and still provided strong price growth, due to demand outstripping supply.”
“Even the much-anticipated ‘fixed-rate cliff’ – the transition of mortgage holders off lower fixed rates to higher variable rates – has only had a mild impact and households have so far coped well with the rate rises, due to a robust labour market and Australia’s historic low unemployment rate,” said Rynne.
Over the next six months, KPMG expects there to be “considerable national variation” with Perth’s house prices expected to rise by over 10 per cent, while Darwin and Hobart’s prices are only marked for a 1.4 per cent growth.
Unit prices over the same period are projected to be similarly distributed across the nation, with the predicted increases ranging from 8.6 per cent in Perth to 1.3 per cent in Canberra.
Throughout 2025, KMPG relayed that “there will be much greater house price growth consistency across the country”, with Melbourne house values expected to rise the most at 6.5 per cent.
Brisbane, which is expecting the least growth, is still forecasting gains of 5.1 per cent.
Nonetheless, the firm stated that unit prices are predicted for “considerable regional variation next year”; Perth could see 8 per cent gains while Brisbane is only expectant of a modest 2.5 per cent increase.
Explaining the fluctuation, Rynne said that “supply has remained insufficient, and while we do forecast a slight rise in housing approvals, this will take time to translate into actual housing completions, due to the time lag inherent in the process”.
“Although material costs and financial costs have started to stabilise after sustained increases, labour costs continue to increase in response to high demand for qualified tradespeople.
“Many barriers remain to developers building new homes, while continuing high rental costs are pushing renters to look to buy instead, which is pushing up demand.”
Looking back at recent price changes, KPMG did note that the forecasts pale in comparison to the gains made by property prices over the year to March 2024, when house prices increased by 7.7 per cent, and apartments by 6.1 per cent.
“After the exceptional house price increases we have seen in several capital cities over the past 12 months, we do forecast a slowdown in the rate of growth, given the drop in migration, the delayed impact of high interest rates and a predicted increase in unemployment over the rest of this year,” said Rynne.
“Foreign investment activity has also yet to regain its levels of two years ago. But overall we will still see solid price gains over the next 18 months, especially in 2025, as the RBA starts to introduce rate cuts, as we anticipate,” the chief economist concluded.