House values are expected to surge by nearly 10 per cent from midway through next year as buyer demand drives up prices.
Nationally, prices will jump by 4.9 per cent over the next nine months.
And then after that, from June 2024 onwards, prices are set to rise 9.4 per cent.
That’s according to the Residential Property Market Outlook report from consultancy firm KPMG released on Monday, which forecasts that national house prices are set to explode from mid-2024 until mid 2025.
“Projected rate cuts and constrained housing supply are poised to drive consistent growth in both house and unit prices during FY25,” the report’s authors noted.
The surge is somewhat reminiscent of the housing boom of 2021, which saw house prices surge by 29 per cent.
Since then, inflation has hit Australia hard, with back-to-back interest rate rises causing a lot of those property gains to be erased in the past 12 months.
But KPMG’s property report predicts that interest rate hikes are unlikely to continue for much longer while the real estate market is picking up momentum.
Two surprising cities have emerged as the clear winner in the scenario — Perth and Hobart.
Homeowners at the Western Australian capital will likely enjoy an 8.4 per cent boost to their properties for the 2024 financial year.
“House price growth in Perth is expected to be the strongest,” the report noted.
Then Hobart will overtake Perth heading into the 2025 financial year. The Tasmanian capital’s houses will surge by 14.2 per cent, according to the analysis.
Likewise, Hobart is also an outlier when it comes to apartment growth.
Hobart’s apartment units are set to outperform all other capital cities with rises of 8.7 per cent and 10 per cent respectively over the next two years.
Sydney, Melbourne and Adelaide followed closely behind, also set to rise above the national average in that period of time.
Darwin residents, however, are not in luck.
In the next 12 months, “house prices are expected to recover further except for Darwin,” the report stated.
Indeed, Darwin and Brisbane units are “likely to experience smaller gains than the national average”.
The analysis also found that prices would make a drastic recovery because the Reserve Bank of Australia (RBA) would soon start pulling back on interest rate hikes, allowing a rebound to take place.
“The end of the RBA’s tightening cycle is in sight,” the authors stated.
They said an increase in foreign investment since the beginning of the pandemic is also driving the price growth.
Dr Brendan Rynne, KPMG Chief Economist, said: “Despite high interest rates, constrained supply will likely dominate the factors influencing property prices in the short term and result in continued price gains in most markets during FY24.”
He said the “scarcity of available land, falling levels of approvals and slower or more costly construction activity” would be the source of the surge, alongside rate cuts, the potential for relaxed lending conditions and rental costs pushing tenants into buying their own properties.
In some bad news, however, it appears the rental crisis shows no signs of abating in the coming years.
Annual rent growth will be 5.6 per cent over the next two years – which is 2.5 per cent higher than the long-term average.
“Rent inflation is likely to be higher than the 10-year pre-pandemic average growth rate by 0.61 percentage points each quarter for the next two years,” the report added.