KPMG’s Residential Property Market Outlook for January 2025 presents a mixed bag for Australia’s construction industry. While housing demand remains strong, supply constraints, labour shortages, and economic conditions continue to shape the landscape.

Key insights for builders and contractors:

• Slower housing price growth – National house prices grew 5.1% in 2024, but growth is expected to slow to 3.3% in 2025 before rebounding to 6.0% in 2026. Unit prices will likely outpace houses due to affordability constraints.
• Supply vs. demand imbalance – KPMG projects a shortfall of 95,000 dwellings between 2023 and 2026, keeping housing affordability under pressure. Population growth continues to outstrip new housing completions.
• Building approvals recovering – After hitting a low in early 2024, approvals for new houses rose 23%, and unit approvals increased by 18%. However, actual completions will remain slow due to construction lags.
• Labour shortages and costs – Wages in construction rose 3.5% in Q3 2024, down from 4.2% earlier in the year, but the industry still faces a critical shortage of skilled tradespeople, particularly in electrical services.
• Interest rates and investor sentiment – The Reserve Bank’s rate cuts, expected from mid-2025, could improve buyer confidence. Investor sentiment is already rebounding, particularly in Brisbane and Perth.

Key statistics:

• 17.5% – Perth’s house price growth in 2024, the highest nationally.
• 50% longer – The time to build a house now compared to pre-pandemic levels.
• 54.4% – The proportion of income first-home buyers need to service a mortgage.

What this means for the industry:

• Demand remains high – The housing shortfall will continue to drive demand for new builds.
• Labour and materials still tight – Expect delays and cost pressures, but construction input price growth is slowing.
• Opportunities in multi-residential – As affordability shifts demand toward units, builders may see more opportunities in medium-density and high-rise projects.

While affordability challenges persist, a stable labour market and easing construction costs could create better conditions by 2026. Builders who can navigate short-term supply chain and labour issues will be well-positioned for growth.

Download the full KPMG report here.