Apartments in big cities are tipped to post stronger price growth than houses in 2025 as properties with a backyard become so expensive that demand eases.
Houses prices across last year rose at a much stronger pace than units, continuing a trend that accelerated during the pandemic.
However more and more suburbs are now passing the $1million mid-point for houses, with land in short supply, so an increasing number of buyers are instead purchasing apartments.
KPMG is expecting units to have more momentum this year, as they are ‘a more realistic route into the housing market given the ongoing affordability crisis’ during an immigration-led population boom.
Outside of Sydney, apartments typically cost less than $600,000, which is attainable for a buyer earning less than six figures.
However those prices may not last, as apartment sales are forecast to be stronger than that of houses in every city in 2025.
KPMG’s chief economist and partner Brendan Rynne is forecasting unit prices to climb by 4.6 per cent in 2025 compared with 3.3 per cent for houses.
‘The shift is 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 that sub-market,’ he said.
‘As a result, there is growing demand for more affordable housing options, particularly apartments and townhouses.
‘Attached dwellings offer relatively lower entry points compared to houses, making them more viable options for a larger pool of buyers.’
Building approvals are improving as wholesale costs moderate, but Dr Rynne said construction activity would still fail to keep pace with immigration-fuelled population growth.
‘This still means only a limited translation of increased approvals into actual housing completions in 2025 and 2026,’ he said.
‘High immigration rates have added significant pressure to the housing market.’
Sydney, ‘s most unaffordable property market, is expected to see five per cent apartment price growth in 2025, compared with 3.3 per cent for houses.
Sydney’s median apartment price of $859,963 is more expensive than Perth’s mid-point house price of $847,518, and almost as expensive as Adelaide’s typical house value of $866,327, CoreLogic data shows.
But the NSW capital’s median house price is particularly unaffordable at $1.471million, and would require a household income of more than $226,000 to even get a loan with a 20 per cent deposit.
In the other capital cities, median house prices are below the $1million mark, while the typical apartment around the $600,000 level is still attainable for an average, full-time worker earning $100,000.
Melbourne was ‘s weakest performing property market in 2024, but is expected to see growth this year.
Again, KPMG expected units to do better than houses with a 4.7 per cent increase expected this year, compared with 3.5 per cent for houses.
The Victorian capital’s median unit price of $607,414 is still affordable for an average-income worker and is now cheaper than Brisbane’s equivalent of $680,893.
Brisbane apartment prices are tipped to climb by 4.1 per cent in 2025, compared with 3.1 per cent for houses, with both levels set to be more subdued than last year’s double-digit increases.
Outside of Sydney, Melbourne and Brisbane, apartments typically cost less than $600,000.
Adelaide is expected to see a 4.6 per cent increase in unit values, as house prices go up by just two per cent.
Perth is expected to see a five per cent rise in unit prices, compared with four per cent for houses.
Hobart unit prices are tipped to climb by four per cent this year, compared to house prices at 1.8 per cent.
SYDNEY: Units up 5 per cent as houses rise 3.3 per cent
MELBOURNE: Units up 4.7 per cent as houses rise 3.5 per cent
BRISBANE: Units up 4.1 per cent as houses rise 3.1 per cent
ADELAIDE: Units up 4.6 per cent as houses rise 2 per cent
PERTH: Units up 5 per cent as houses rise 4 per cent
HOBART: Units up 4 per cent as houses rise 1.8 per cent
DARWIN: Units up 3.8 per cent as houses rise 1.2 per cent
CANBERRA: Units up 4 per cent as houses rise 3.5 per cent
Source: KPMG forecasts
Darwin apartment values are tipped to rise by 3.8 per cent, from a low base of $366,616, compared with 1.2 per cent for houses.
In Canberra, unit values are forecast to go up by four per cent as house prices increase by 3.5 per cent.
KPMG said property price growth was likely to be weaker than last year, even as the Reserve Bank cut interest rates for the first time since late 2020.
‘The likely delay to the first cash rate cut, together with affordability issues will keep prices growth at modest levels in 2025,’ it said.
The futures market is now expecting three interest rate cuts in 2025, that would take the RBA cash rate from 4.35 per cent to 3.6 per cent for the first time since May 2023.
KPMG is expecting rate cuts to boost property prices in 2026, particularly in Sydney.
Sydney house prices were tipped to surge by 7.8 per cent in 2026, compared with 6.1 per cent for units.
‘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,’ Dr Rynne said.