KPMG predicts huge house price rise in Sydney – realestate.com.au

House prices in Sydney are forecast to rise even further in 2026 and 2027, despite increasing uncertainty over the direction of interest rates and crippling housing affordability.

KPMG’s latest Residential Property Outlook report predicts that the port city will record an average 5.8 percent increase in house prices and a 5.3 percent increase in unit prices by 2026.

This growth would be lower than the 7.7 percent expected nationally over the year and lower than the almost 7 percent increase in home values ​​in Sydney compared to 2025.

The global financial advisory group predicts an additional 5.7 percent average increase in Sydney house prices by 2027 and a 4 percent increase in unit prices in the same year.

A further increase in house prices was expected, mainly because not enough houses in Sydney were being marketed or built to meet buyer demand.

Analysis of the KPMG projections using PropTrack data showed that buyers could be paying staggering prices by the end of 2027.

With the median house price in Sydney already at $1.62 million, KPMG’s projected growth would add a total of $192,128 to the average cost of buying a home, pushing the median to just over $1.81 million.

An average-priced house in Sydney could cost more than $1.8 million by 2027.

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The projected growth in unit prices would increase the current median by nearly $84,000, from $880,000 today, to about $964,000 by the end of 2027.

KPMG’s forecasts assumed interest rates would remain flat, but the group’s chief economist Brendan Rynne said even a 0.25 percent rate hike would not materially change the market’s trajectory.

“Sydney is more affected by interest rates than other cities because the (market) fundamentals are more unbalanced, but a rate hike would not depress prices,” he said.

The ASX’s RBA Rate Tracker showed markets were pricing in a 56 per cent chance of a rate change at the next RBA board meeting in February, but Dr. Rynne said he was more doubtful.

Dr. Rynne said there is a good case for leaving rates unchanged because job growth in the economy has been slow, despite low unemployment, and inflation has been falling in a number of ways.

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Unit prices could average $964,000 by 2027.

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“With a host of other uncertainties, it would be appropriate for the RBA to sit on its hands,” he said.

KPMG revealed that home prices have the potential to continue rising, even amid various economic headwinds, as buyer demand far exceeds available housing supply.

Much of Sydney still faces a chronic housing shortage – a shortage that is likely to persist due to ongoing problems in the construction sector, KPMG added.

Housing supply has not matched current rates of population growth, which remained strong even with a recent decline in migration numbers, the group noted.

Government incentives such as the First Home Guarantee Scheme put extra pressure on the already limited supply of homes by encouraging more people to buy, the report said.

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KPMG chief economist Brendan Rynne said market fundamentals in Sydney are out of balance. Photo: Alan Barber

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Dr. Rynne said the scheme had pushed up prices at a time when affordability restrictions should have moderated growth in many areas, but he noted this effect was more muted in Sydney.

“The strong momentum in the first half of 2025 should have waned as affordability pressures continued to deter buyers,” said Dr Rynne. “Instead, the second half of last year further accelerated growth.”

PropTrack data shows prices in Sydney will rise by an average of almost 7 per cent by 2025.

PropTrack economist Eleanor Creagh said continued price growth was expected through 2026 due to rising construction costs, delays in the new supply pipeline and an imbalance between supply and demand.

Ray White chief economist Nerida Conisbee said growth could be dampened by the threat of rising interest rates, which would make homebuyers more cautious with their offers.

But she added that growth at the most affordable end of the market should remain strong.