03.02.2025

Unit prices predicted to rise by 4.6% in 2025

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The recent KPMG Residential Property Market Outlook report predicts that units will slightly outperform houses over the next two years, rising 4.6 per cent this year and 5.5 per cent the next.

House prices will rise nationally by 3.3% over the next 12 months but a stronger 6% in 2026, KPMG’s latest 6-monthly property report on Australia’s capital cities finds.

The Residential Property Market Outlook finds unit (apartments and townhouses) prices will gain by 4.6% in 2025 and then 5.5% the following year, as they represent a more realistic route into the housing market, given the ongoing affordability crisis.

Overall, house price growth this year will be down on 2024, which saw an average 5.1% rise nationally, while unit price growth will be largely consistent with last year’s average 4.5% rise. 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.

City by city price growth forecasts over the next two years

For houses this year there will once again be some regional variation with Perth house prices rising by 4% but Darwin seeing only 1.2% growth.  Canberra and Melbourne will be solid performers on 3.5% growth each, with Sydney a more restrained 3.3%, Brisbane 3.1%, while Adelaide and Hobart are expected to be lower on 2% and 1.8% respectively.

In 2026, where house price growth will be higher, Sydney will reclaim top spot on 7.8%, with Melbourne and Brisbane next in line on 6.0% and 5.6% respectively.

Units

One of the key trends identified in the report as emerging in the housing market is unit prices being expected to modestly 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. 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 finds. ​

For units, the predicted increases for 2025 range from Sydney and Perth’s 5% growth to Darwin’s 3.8%.  In 2026, Melbourne at 7.1% and Sydney at 6.1% will see the strongest growth. 

Dr Brendan Rynne, KPMG Chief Economist, said: “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. 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.”

“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.”

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