KPMG lifts outlook + Smaller cities lead growth + Approvals surge
National house prices are set to climb faster than expected this year, with KPMG upgrading its 2025 forecast to 4.9% growth, up from 3.3%, after interest rate cuts boosted buyer sentiment and activity.
Adelaide and Darwin are tipped to lead the pack, each with 7% house price growth, followed by Perth, Sydney and Melbourne (5%). Brisbane is forecast at 4%, Hobart at 2% and Canberra at just 1%.
Unit prices are expected to rise faster in many markets, with Brisbane units set for a standout 7% gain, and Darwin units topping the list at 8%, as affordability pressures push more buyers towards smaller dwellings.
In 2026, national growth is expected to ease to 4.5% as supply improves, population growth stabilises and affordability constraints weigh on demand.
However, completions are expected to average just 160,000 new dwellings annually over the next two years – 30% below the level needed to meet national housing targets – meaning supply constraints will continue to underpin prices.
Smaller cities deliver bigger gains over two decades
Adelaide and Hobart have outpaced Sydney and Melbourne for house price growth over the past 20 years, according to a new valuation report from the Australian Property Institute.
Between 2005 and 2024, Adelaide’s median house prices soared 175.1%, just ahead of Hobart at 171.9%. Sydney (170.9%), Brisbane (169.4%) and Melbourne (169.2%) followed close behind, but the results challenge long-held assumptions about where the best investment returns lie.
For units, Hobart again led the way with 133.5% growth, followed by Adelaide (128.9%) and Melbourne (109.1%). Sydney and Brisbane underperformed the national average.
The report said that the smaller capital cities are increasingly outperforming their bigger cousins, despite drawing fewer migrants. While Sydney and Melbourne attracted the bulk of new arrivals, their housing markets delivered slightly lower returns.
These results suggest other forces, like affordability, supply constraints and lifestyle shifts, may have a bigger influence on long-term capital growth than migration alone.
Approvals hit 22-month high in June
June’s building approvals data delivered good news for housing supply with numbers up 11.9% to 17,076 dwellings, the strongest monthly result in nearly two years, according to the Australian Bureau of Statistics.
The spike was largely due to a 33.1% increase in multi-unit approvals, while house approvals dipped slightly (-2.0%) for the month.
Over the full 2024/25 financial year, 187,330 dwellings were approved, 13.9% more than the previous year. Multi-unit approvals rose 27.9% over the year, while detached house approvals grew 6.1%.
While the turnaround is welcome, the Housing Industry Association (HIA) cautioned that these figures still fall short of the 240,000 approvals per year needed to meet the federal government’s housing targets.
“Multi-unit activity, in particular, needs to do more heavy lifting. Multi-unit commencements need to double from current levels in order to achieve the government’s housing targets,” HIA Senior Economist Tom Devitt said.
“This is unlikely to occur under current policies. Labour and land shortages, obstructionist regulations and punitive surcharges on institutional investors have pushed improving sentiment away from apartments back into the detached housing sector.”
