AMP, KPMG call for Australian house, unit prices to climb back-to-back in 2025, 2026
Both KPMG and AMP are now calling for Australian house price growth to accelerate in 2026 as lower rates boost borrowing capacity.
Ongoing housing shortages and three or more interest rate cuts this year are set to accelerate Australian house price growth into 2026, despite lingering concerns about affordability, according to financial services group AMP.
The latest CoreLogic data shows national house and unit prices snapped a three-month losing streak in February to post an average rise of 0.3%, as Melbourne's houses lead the rebound on a 0.4% rise after the Reserve Bank cut borrowing rates 25 basis points, to 4.1%.
AMP's chief economist, Shane Oliver, said he now expects multiple rate cuts to produce back-to-back years of national house price gains, with a forecast for prices to lift 3% in 2025 before that growth accelerates to around 5% in 2026.
"Three or four more rate cuts should support that growth," Mr Oliver said.
"Roughly speaking, the 0.25% rate cut [by the Reserve Bank] when passed on to variable mortgage rates will add about $9000 to how much a buyer on average earnings can borrow, which along with three further rate cuts into early next year will drive a significant increase in the capacity of buyers to pay for a property."
Dr Oliver's forecast is matched by the economics team at KPMG Australia, which calls for national house prices to jump 6% in 2026.
In 2025, KPMG expects house prices to rise by 3.3% in Sydney, 3.1% in Brisbane, and 3.5% in Melbourne. Unit prices are expected to add 5% in Sydney, 4.7% in Melbourne and 4.1% in Brisbane.
“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," said KPMG's chief economist Dr Brendan Rynne.
Supply shortage
Australia still faces a national shortage of between 200,000 and 300,000 dwellings as record immigration under the Labor government boosts demand for somewhere to live, according to Dr Oliver.
The ongoing demand growth means the ratio of home prices to average annual wages in Australia now stands around a record 14x as Australians spend higher percentages of their after-tax salaries to service mortgage debt.
Last Wednesday, many economists became more confident that the Reserve Bank would deliver another rate cut for leveraged-up households by May, after data showed that core inflation had slowed to 2.8% in January. While headline inflation eased to 2.5%, in the middle of the central bank's targeted range between 2% and 3%.
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Tom covered markets as a Markets Reporter & Commentator at the Australian Financial Review for nearly five years. Prior to that he was the Managing Editor of The Motley Fool Australia leading a team of around 20 investment writers during a five-year period of massive online growth. Before that Tom worked in equities management at the Bank of New York Mellon in London and as a holder of professional investment qualification the Investment Management Certificate is eligible for membership of the CFA Society of the UK.
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Tom covered markets as a Markets Reporter & Commentator at the Australian Financial Review for nearly five years. Prior to that he was the Managing Editor of The Motley Fool Australia leading a team of around 20 investment writers during a...
Tom covered markets as a Markets Reporter & Commentator at the Australian Financial Review for nearly five years. Prior to that he was the Managing Editor of The Motley Fool Australia leading a team of around 20 investment writers during a...
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