KPMG, a leading accounting firm, predicts a robust 4.9% increase in house prices over the next 9 months, followed by an impressive surge of 9.4% in the year leading to June 2025. For apartments, the forecast is a more moderate growth of 3.1% by next June and a 6% increase in the subsequent 12 months.
Regional Variations in Growth:
Perth houses are expected to rise by 8.4% in the rest of FY24.
Hobart is anticipated to lead in FY25 with a remarkable surge of 14.2%.
Potential Driving Forces:
Despite higher interest rates, constrained supply is expected to dominate short-term influences, resulting in continued price gains in most markets during FY24. Further acceleration in house and unit prices is projected for the next financial year due to limited dwelling supply, higher demand from migration, anticipated rate cuts, relaxed lending conditions, rising rental costs, barriers to new home construction, renewed foreign investor demand, and the persisting post-pandemic demand for more space in the era of remote work.
Challenges Ahead:
The report acknowledges potential headwinds, with mortgage stress being a significant concern. First-time buyers are now using about half their earnings on mortgage payments, a notable increase from a third just three years ago. Approximately $350 billion of mortgages, covering 880,000 Australian households, is set to expire this year. While this poses a challenge, the overall factors pushing prices up are expected to outweigh these constraints.
Rental Dynamics and Homeownership:
High rental costs and low vacancy rates may make homeownership more appealing. As renting costs become comparable to the expenses of 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.
KPMG's Chief Economist, Dr. Brendan Rynne, emphasises that market dynamics vary across different cities, leading to considerable regional variations in property price trends.
DMC Property Advisory
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