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, KPMG’s new property report on Australia’s capital cities finds.

Apartment prices across the country will see an average rise of 3.1% by next June, then a 6% increase in the next 12 months.

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.  

The report details the varied pressures impacting on property prices, with a range of push and pull factors countering each other – but with limited supply and high demand ultimately outweighing interest rates. 

Dr Brendan Rynne, KPMG Chief Economist, said: “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.”

“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 percent 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.”

“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.”

Those regional variations in prices have been significant over the three years since the start of COVID-19, the report outlines. Adelaide houses outperformed the national average, with prices rising 40% from June 2020 to June 2023, with no sign of having been impacted by the contractionary monetary policy cycle. By contrast, after sharp rises during the pandemic, Sydney and Melbourne house prices fell by -1.3% and -1.4% over the year to June 2023. 

Other factors have changed from the height of the pandemic, the report observes. The generous Home Builder stimulus led to a surge of housing approvals and subsequent completions. But shrinking approvals, and steadily rising building material costs are now constraining housing supply. Migration too, which collapsed during Covid-19, will rise by over 400,000 this year, while foreign investment is steadily recovering - albeit still lower than pre-pandemic levels – particularly with the relaxation of travel restrictions and the re-opening of China’s borders.

The report 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.” 

Forecast of growth in house prices (%, y/y)

(Precentage 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 (%, y/y)

(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%

For further information

Ian Welch
KPMG Communications
0400 818 891