House prices will rise nationally by 4.9% over the next nine months, before surging 9.4% in the 12 months to June 2025.

Apartment prices will see slower growth, rising 3.1% by next June, before a 6% increase in the next 12 months.

That's according to KPMG's Residential Property Market Outlook September 2023, which forecasts that limited supply and high demand will ultimately outweigh interest rates.

KPMG Chief Economist Dr Brendan Rynne said a number of factors are expected to push property prices up.

"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," he said.

"House and unit prices will then 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.

"The supply issue will combine with several other factors to push assets prices up – higher demand due to heavier migration; anticipated rate cuts moving into FY25, and potentially relaxed lending conditions;  high rental costs pushing renters to look to buy instead;  barriers to developers building new homes; foreign investor demand picking up again; along with the longer post-pandemic demand for more space as people continue to work from home.”

Two surprising cities are expected to outperform - Perth and Hobart.

Perth houses prices are expected to rise the most - by 8.4% in the 2024 financial year - before Hobart overtakes all other cities in the 2025 financial year and surge by 14.2%

Hobart units are also predicted to outperform all other capital cities, with rises of 8.7% and 10% respectively over the next two years, followed by Sydney, Melbourne and Adelaide.

Rising rental costs and low vacancy rates could also play a big role in pushing up property prices as more renters try to get into the property market.

However, the report notes there are some factors that could tip property prices in the other direction.

"The main one being mortgage stress," Dr Rynne said.

"We estimate around $350 billion of mortgages, or half of all fixed rate credit will expire this year – covering 880,000 Australian households. The remaining 38 percent of fixed rate credit, which includes about 450,000 loan facilities, will expire in 2024 and beyond.

"Some homeowners who previously locked in low rates might be unable to pay – and won't be able to refinance to a lower and competitive rate."

But the report notes the factors pushing prices up will more than counteract this.