How rental pain is expected to push home prices higher

With rents continuing to rise, a new report projecting sale prices through 2025 forecasts tenants on the fence will pursue buying to beat the volatile rental market.

According to KPMG's latest property report, house prices are expected to rise nationally by 4.9 per cent over the next nine months and then surge by 9.4 per cent in the year to June 2025.

Units, similarly, are projected to see an average rise of 3.1 per cent by next June, then a 6 per cent increase in the next 12 months.

The report outlined various forces impacting property prices, with factors putting pressure on either side of the scale. Ultimately, however, the research found that limited supply and high demand will greatly outweigh interest rates, with the latter servicing almost to encourage buying and increasing rental prices off the back of landlords' attempting to recoup costs push renters who can buy into the market.

"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", Dr Brendan Rynne, KPMG's chief economist, said.

"House and unit prices will accelerate further in the next financial year as dwelling supply continues to be limited, due to scarcity of available land, falling levels of approvals and slower or more costly construction activity."

This lack of supply will combine with several other factors to keep activity in the buyer's market high, according to Dr Rynne.

Current tenants are predicted to redouble their efforts to get out of the rental market, even weathering the short-term pain of extremely stretched finances to secure the relative stability of owning over the uncertainty of astronomical rental increases or eviction.

Per KPMG's data, rental price growth is not expected to slow anytime soon, servicing as a long-term incentive for buying.

Home Loans
Written by Chloe Boswell
27 September, 2023
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