House prices across the country will soar over the next 18 months, according to Big Four accounting firm KPMG.
In a new report released Monday, KPMG also predicts that housing affordability will become more difficult for struggling homebuyers as prices retreat beyond pre-rate hike and pre-pandemic levels.
In the report, Residential Real Estate Market Outlook, September 2023Dr Brendan Rynne, chief economist at KPMG, said a number of factors were expected to push prices up.
“Despite high interest rates, limited supply will likely dominate the factors influencing property prices in the near term and will result in continued price increases in most markets during FY24,” said.
“House and unit prices will accelerate further in the next financial year as housing supply remains limited, due to a shortage of available land, falling approval levels and a slowdown in construction activity. slower or more expensive.
The recovery in post-pandemic immigration is also expected to add significant pressure to housing demand.
House prices will rise nationally by 4.9 per cent over the next nine months and then rise by 9.4 per cent in the year to June 2025, according to KPMG’s new property report on Australia’s capital cities.
Apartment prices are also expected to rise at a slightly lower rate of 3.1 per cent in June and then another six per cent over the next 12 months.
As the housing market recovers from back-to-back rate increases, mortgage holders may be relieved to hear that KPMG has forecast rate cuts for the next financial year.
“The supply issue will combine with several other factors to drive up asset prices: higher demand due to increased migration, anticipated rate cuts towards fiscal 2025 and potentially loose credit conditions,” Dr Rynne said .
According to KPMG, high rental costs and low vacancy rates may make home ownership more attractive to Australians.
“If rent becomes more affordable, it may put downward pressure on housing prices,” the report reveals.
“When the cost of renting is comparable to the cost of buying and owning a similar property, households may opt for home ownership, which could drive up housing prices.”
Units in Sydney, Melbourne and Hobart are likely to see larger profits than the national average over the next two years.
The report revealed that declining housing construction approvals and rising construction material costs are also limiting housing supply.
There were some factors pushing in the opposite direction, Dr. Rynne said.
“The main one is mortgage stress,” he said.
“First-time buyers now need to use around half of their earnings on mortgage payments, up significantly from a third just three years ago,”
Half of all fixed rate credit is estimated to expire this year, approximately 880,000 Australian households, according to Dr Rynne.
“Some homeowners who previously locked in low rates may be unable to pay and will not be able to refinance at a lower, competitive rate,” he said.
Despite this, Dr Rynne said that “the factors that drive up prices will more than offset those that restrain them.”