Melbourne’s housing market is poised to outperform Sydney over the next two years, with prices accelerating by 12 percent in the year to June 2025, sparked by higher demand and more constrained supply, KPMG predicts.
Sydney house price growth is also expected to gain momentum, albeit at a slower 10.3 percent after inflation is factored in, during the same period.
Demand by foreign investors is also starting to pick up again and tipped to keep rising.
KPMG chief economist Brendan Rynne said increased demand and markedly lower supply would fuel those healthy gains by the end of 2025 financial year.
“Demand is likely to increase due to heavier migration, anticipated rate cuts moving into 2025 financial year and potentially relaxed lending conditions,” he said.
“High rental costs could also push renters to buy instead, along with the longer post-pandemic demand for more space as people continue to work from home.”
The Foreign Investment Review Board half-year figures of the 2022-23 financial year was at $4.3 billion, already more than half of the total investment achieved in the 2022 financial year.
“On the supply side, housing shortage is expected to persist due to the pullback in construction activity,” Dr Rynne said.
“The imbalance between population growth and housing supply will have a greater influence on prices than the dampening effect of mortgage stress and fixed mortgage reset,” he said.
“Melbourne is anticipated to outperform Sydney as supply in Melbourne is likely to be more constrained as seen by lower future dwelling completions,” Dr Rynne said.
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