PHOTO: The Australian economy leaves New Zealand ‘for dead’. FILE
According to a recent report by the prominent accounting firm KPMG, house prices are poised for a substantial increase over the next 18 months across the nation. The report, titled “Residential Property Market Outlook, September 2023,” also anticipates that housing affordability will become even more challenging for struggling homebuyers. This difficulty arises as prices surpass levels seen prior to interest rate hikes and the onset of the pandemic.
Dr. Brendan Rynne, the Chief Economist at KPMG, highlighted several factors driving these price hikes. He noted that despite elevated interest rates, the limited housing supply is expected to be the dominant factor influencing property prices in the short term, leading to continued price growth in most markets during the fiscal year 2024. Furthermore, Dr. Rynne projected a further acceleration in house and unit prices in the subsequent financial year due to persistent supply constraints caused by factors such as scarce available land, declining approval rates, and slower, more expensive construction activity. Additionally, the post-pandemic recovery in immigration is expected to exert significant pressure on housing demand.
House prices are set to soar is demand continues to dominate a short supply on the market.
KPMG’s property report indicates that house prices are set to increase by 4.9 percent nationally in the next 9 months and then surge by 9.4 percent in the year leading up to June 2025 in Australia’s capital cities. Apartment prices are also expected to rise, albeit at a slightly lower rate of 3.1 percent by June, followed by an additional six percent over the subsequent 12 months. Mortgage holders may find relief in KPMG’s prediction of rate cuts in the upcoming financial year, which will further contribute to the increase in asset prices.
The report also suggests that high rental costs and low vacancy rates could make homeownership more appealing to Australians. When renting costs become comparable to the expenses associated with buying and owning a similar property, households may opt for homeownership, potentially driving up house prices.
Notably, units in Sydney, Melbourne, and Hobart are expected to experience larger gains than the national average over the next two years. The report attributes this trend to shrinking home building approvals and rising building material costs, which further restrict housing supply.
However, Dr. Rynne acknowledged the counteracting factor of mortgage stress. First-time buyers now need to allocate approximately half of their earnings to mortgage payments, a significant increase from just three years ago. Roughly 880,000 Australian households are estimated to have half of their fixed-rate credit expire this year, potentially making it challenging for some homeowners who previously secured low rates to meet their financial obligations and refinance to competitive rates.
KPMG reveals forecasts of growth in house prices across Australia.
Despite these challenges, Dr. Rynne believes that the factors propelling prices upward will outweigh those restraining them in the housing market.
SOURCE: NEWS.COM.AU