KPMG, a leading professional services firm, has released its latest economics report on the property market in Australia. According to the report, house and property prices are expected to increase gradually over the next nine months and then experience a significant surge in the fiscal year 2025.
The report reveals that home prices across the country will see a national rise of 4.9% over the next nine months. This will be followed by a surge of 9.4% in the year leading up to June 2025. Additionally, apartment prices are projected to rise by an average of 3.1% by June next year, with a further increase of 6% in the following 12 months.
However, it’s important to note that there will be regional differences in these price changes. The report highlights that Perth will experience the highest increase in house prices, with a rise of 8.4% expected in the remainder of fiscal year 2024. However, Hobart is projected to surpass other cities in fiscal year 2025, with a surge of 14.2%.
In terms of apartments, Hobart is expected to outperform all other capital cities, with predicted increases of 8.7% and 10% in the next two years. This will be followed by Sydney, Melbourne, and Adelaide.
The report also highlights the various factors that are influencing property prices. It notes that there are both positive and negative pressures at play, but limited supply and high demand will ultimately be the primary drivers. Dr. Brendan Rynne, Chief Economist at KPMG, explains that despite high interest rates, constrained supply will have a significant impact on prices in the short term. This, coupled with a scarcity of available land, falling approval levels, and slower construction activity, will contribute to continued price gains in most markets during fiscal year 2024. Prices are then expected to accelerate further in the following financial year.
However, the report also acknowledges the presence of factors that could counter these trends, such as mortgage stress. The increasing cost of mortgages means that first-time buyers now need to allocate approximately half of their earnings to mortgage payments, a significant rise from just three years ago. In addition, an estimated $350 billion worth of mortgages, covering 880,000 Australian households, is set to expire this year.
In conclusion, Dr. Rynne emphasizes that while there are factors that may push against rising property prices, such as mortgage stress, the limited supply of dwellings will ultimately drive continued price gains in the short term. Looking ahead, the scarcity of available land, falling levels of approvals, and slower construction activity will continue to constrain supply, leading to further acceleration in house and unit prices in the next financial year.
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