When Aussie home prices will spike
Australian house prices are expected to struggle for a period of time before surging strongly, according to a new report.
Australian house prices are expected to struggle in 2025 in comparison to previous years, but they will take off again in 2026 according to a new report.
Aussie house price growth is predicted to slow this year, outpaced by the rise in value of smaller dwellings.
According to KPMG’s latest six-month property report on Australia’s capital cities, overall house price grown this year is set to rise by 3.3 per cent. That is down on 2024, which witnessed an average 5.1 per cent rise nationally.
Unit price growth is this year expected to be in line with 2024’s average of 4.5 per cent.
One of the main emerging trends highlighted in the KPMG’s Residential Property Market Outlook report is that unit prices are expected to outpace house prices over the next two years.
“The shift will be largely driven by ongoing affordability constraints, particularly in capital cities, where the escalating prices of detached houses have left a large portion of the population priced out of the market,” the report finds.
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“As a result, there will be growing demand for units, as a more affordable housing option. Attached dwellings offer relatively lower entry points compared to houses, making them more viable options for a larger pool of buyers.”
The report predicts unit (apartments and townhouses) prices will rise by 4.6 per cent in 2025 and then 5.5 per cent the following year, as they represent a more realistic route into the housing market, given the ongoing affordability crisis.
Price growth will be more pronounced in the second half of 2025, aligning with the interest rate cuts KPMG believes will start by the end of the second quarter.
“While 2024 was a year of high interest rates and inflation and subdued consumer sentiment, the housing market withstood all those factors and still provided strong price growth, due to demand outstripping supply,” Dr Brendan Rynne, KPMG Chief Economist, said.
“Even the much-anticipated ‘fixed-rate cliff’ – the transition of mortgage holders off lower fixed rates to higher variable rates – had only had a mild impact and households generally coped well with the rate rises, due to a robust labour market and Australia’s historic low unemployment rate.
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“We are starting to see building approvals moving in the right direction to meet the current supply shortages, which was driven largely by robust population growth. Construction costs are also starting to moderate.
“However, this still means only a limited translation of increased approvals into actual housing completions in 2025 and 2026 due to the time lag inherent in the process from approval to completion and the lack of feasibility.
“Despite affordability and availability issues and a delayed interest rate cut, increased investor sentiment, and anticipated relaxed lending conditions will help support modest price growth in 2025, and then stronger growth next year.
House price growth will again undergo regional variation this year, with Perth house prices rising by 4 per cent but Darwin seeing only 1.2 per cent growth. Canberra and Melbourne will be solid performers on 3.5 per cent growth each, with Sydney a more restrained 3.3 per cent.
Brisbane 3.1 per cent, while Adelaide and Hobart are expected to be lower on 2 per cent and 1.8 per cent respectively.
In 2026, where house price growth will be higher, Sydney will reclaim top spot on 7.8 per cent, with Melbourne and Adelaide next in line on 6.0 per cent and 5.6 per cent respectively. For units, the predicted increases for 2025 range from Sydney and Perth’s 5 per cent growth to Darwin’s 3.8 per cent. In 2026, Melbourne at 7.1 per cent and Sydney at 6.1 per cent will see the strongest growth.
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Originally published as When Aussie home prices will spike
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