KPMG Just Reversed Their Property Forecast. Most People Aren’t Ready For What Comes Next
By: Niro Thambipillay
August 9, 2026
KPMG has sharply revised its Australian property forecast after unexpected inflation, three consecutive cash-rate increases, geopolitical conflict, and federal budget changes weakened buyer confidence. In this article, I examine KPMG’s new 2026 and 2027 forecasts, why houses and units may perform differently, and which market fundamentals could drive the next recovery.
TL;DR
KPMG expects national house values to fall just 1.1% in 2026 while unit values rise 2.2%, followed by a 2027 recovery of 3.4% for houses and 3.7% for units. The forecast describes a V-shaped path rather than a national crash. Performance will split between cities, suburbs, and property types because affordability, local supply, population growth, rental yields, and economic conditions vary widely. Australia’s housing shortage, steady population growth, and near-record-low vacancy rates remain the structural forces supporting a recovery when buyer confidence returns.
Key Takeaways
- The 2026 house correction is modest: KPMG forecasts national house prices falling 1.1%, equal to $11,000 on a $1 million property.
- Units may rise during the slowdown: National unit prices are forecast to increase 2.2% in 2026.
- A recovery is expected in 2027: KPMG forecasts houses rising 3.4% and units 3.7% next year.
- Markets will perform differently: Affordability, supply, population growth, and local economic fundamentals will determine outcomes.
- Not every apartment is equal: Low-rise units in supply-constrained, desirable locations have stronger prospects than towers in oversupplied precincts.
- Structural support remains: Population growth is steady, rental vacancies are near historic lows, and housing construction continues to lag demand.
What Did KPMG Change in Its Property Forecast?
KPMG began the year expecting Australian property values to rise 7.7%. That outlook changed after sticky domestic inflation, renewed inflationary pressure linked to conflict in the Middle East, three consecutive cash-rate increases, and federal budget changes affecting capital gains and negative gearing.
These external developments weakened investor sentiment and reduced buyer activity more than KPMG had anticipated. The revised forecast now expects a temporary correction during 2026 followed by a gradual recovery in 2027.
1. KPMG Is Not Forecasting a National Crash
National house values are forecast to fall 1.1% in 2026. On a property worth $1 million, that represents an $11,000 decline, an amount buyers may already be able to negotiate in today’s softer conditions. At the same time, KPMG expects national unit values to rise 2.2%.
That is not the profile of the largest correction in decades. It is a shallow national slowdown with substantial variation beneath the headline. A genuine crash would require a much stronger combination of excess supply and forced selling, which is why understanding the conditions an Australian property crash would need is more useful than reacting to dramatic predictions.
2. KPMG Expects a V-Shaped Recovery in 2027
KPMG forecasts national house prices increasing 3.4% in 2027 and unit prices increasing 3.7%. Taken together, its two-year outlook describes a V-shaped path: a correction in 2026 followed by recovery the next year.
The most important qualification is that the depth of the downturn and pace of recovery will vary. KPMG expects weakness in Sydney, Melbourne, and Canberra through the remainder of 2026, while growth moderates substantially in Brisbane, Perth, and Adelaide. Even within those cities, suburb-level outcomes will diverge.
3. The Property Market Is Splintering
Niro is already seeing strong competition in selected owner-occupier markets. One property attracted five offers and sold above the advertised range through an unconditional owner-occupier bid. Buyers moving from more expensive markets can view an additional $10,000 to $30,000 as insignificant when the new area is still hundreds of thousands of dollars cheaper.
This buyer behaviour can lead price growth before national data turns. Some suburbs may struggle because supply is high or affordability is stretched, while nearby markets can surge as residents move toward better-value housing.
4. Units Could Outperform, but Selection Is Critical
KPMG expects units to outperform detached houses over the next two years because they offer greater affordability, higher rental yields, and lower-cost entry options. However, that forecast does not mean every apartment market will grow.
High-rise precincts with abundant development capacity, such as Melbourne’s Docklands, have historically delivered weak capital growth. More attractive opportunities may be found in desirable locations where new supply is difficult to add, particularly established low-rise buildings with limited rezoning risk.
Sydney’s Northern Beaches illustrates the principle: apartment demand is supported not simply by the waterfront location, but by the physical constraint on adding significant new supply. Selected apartments may outperform houses in the short term as the price gap widens, although houses have generally delivered stronger growth over longer periods.
5. Structural Fundamentals Still Support Recovery
KPMG says population growth remains steady, rental vacancy rates are near historic lows, and housing supply continues to lag underlying demand. Australia is also falling short of the National Housing Accord construction target.
The forces causing the current slowdown are largely external to the property market. Higher inflation, rate rises, geopolitical conflict, and policy uncertainty have damaged sentiment, but they have not removed the housing shortage or rental pressure. KPMG expects those supply constraints to reassert themselves during 2027.
What Could This Mean for Australian Property?
A nationwide rebound does not mean every location will perform well. Sydney, Melbourne, and Canberra may recover from a lower base, while affordability could prevent the recently booming cities from repeating rapid gains. More sustainable annual growth of 6% to 10% would still create meaningful wealth: 8% growth on a $1 million property equals $80,000.
Buyer confidence can turn quickly when people realise prices have not fallen far and fear paying more later. That returning demand may help create the rebound buyers were waiting to see. The opportunity therefore depends on choosing the right suburbs to invest in before competition becomes widespread.
What Buyers Should Do Now
KPMG’s forecast supports selective preparation rather than blind optimism:
- Research suburb-level supply: Check listings, approvals, development capacity, and rezoning risk.
- Follow buyer behaviour: Multiple offers and strong owner-occupier competition can signal improving demand before broad statistics change.
- Assess affordability: Identify areas attracting residents from more expensive markets.
- Be selective with apartments: Prefer scarce, established, low-rise stock in locations people genuinely want to live.
- Maintain a safety buffer: A 2027 recovery is a forecast, not a guarantee, so the investment must remain affordable under today’s conditions.
Niro’s view is that the current lull is driven by uncertainty rather than oversupply or widespread mortgage distress. Buyers who act early in the strongest markets may secure better prices, but buying blindly remains the greatest risk.
Summary
- KPMG forecasts national house prices falling 1.1% in 2026 and unit prices rising 2.2%
- For 2027, KPMG expects houses to rise 3.4% and units 3.7%
- Its previous 7.7% growth forecast changed after inflation, three rate increases, geopolitical conflict, and federal budget changes
- Sydney, Melbourne, and Canberra may weaken in 2026 while growth slows in Brisbane, Perth, and Adelaide
- Selected units could outperform due to affordability and rental yields, but oversupplied high-rise markets remain risky
- Population growth, low rental vacancies, and insufficient construction continue to support the market
- The rebound will vary by city, suburb, and property type, making careful selection essential
Frequently Asked Questions
Steady population growth, rental vacancy rates near historic lows, and housing construction that continues to lag underlying demand provide structural support. KPMG expects these supply shortages to reassert themselves as buyer confidence improves.
No. KPMG expects performance to vary according to affordability, housing supply, population growth, and local economic fundamentals. Different cities, suburbs, and property types can rise, remain flat, or fall at the same time.
KPMG says units are supported by stronger affordability, higher rental yields, and demand for lower-cost housing. However, supply-constrained established units have better prospects than apartments in precincts where large volumes of new stock can be built.
KPMG expects a gradual recovery during 2027, forecasting national house prices to rise 3.4% and unit prices to rise 3.7%. The timing and strength of that recovery will vary between cities and suburbs.
KPMG forecasts national house values falling 1.1% during 2026. It expects national unit values to rise 2.2% over the same period, so the forecast describes a modest correction rather than a nationwide property crash.
About the Author
Niro Thambipillay
Niro is the founder of Investment Rise, one of Australia’s most trusted property buyers agencies. He has helped hundreds of first-time investors build property portfolios and was voted one of the most trusted Real Estate entrepreneurs in the Asia Pacific region (APAC 2022). Niro is also the author of “How to Build a Property Portfolio That Pays You an Income Every Month.”
