Melbourne Property Market Forecast 2025
Is a Recovery Coming?
The Melbourne property market forecast 2025 remains a topic of debate after years of subdued performance. Unlike Sydney and Brisbane, Melbourne’s market has fallen behind. This is due to government policies, economic changes, and shifts in investment. However, with rising migration and shifting market conditions, could 2025 mark a turnaround for investors and home buyers alike?
Expert Market Analysis
Watch as Property Market Expert Dominic Cavagnino from Binnari Property, breaks down the Melbourne property market forecast for 2025, including recent market challenges, government policy impacts, and investment considerations in Australia’s cultural capital.
Melbourne Property Market Recent Performance
The Melbourne property market in 2025 has seen home values drop for ten months in a row, with prices cumulatively falling 6.9%, as of January 2025. This decline in performance follows years of stagnation impacted by:
– Government policy impacts: land tax hikes, removal of off-the-plan stamp duty concessions, and other policies discouraged investors.
– The decision by the Victorian government to close its borders during the COVID-19 pandemic had a negative impact on the property market unlike other regions of Australia which saw property prices increase.
– The Federal Governments decision to close borders internationally which resulted in overseas students being shut out.
CoreLogic reports that Melbourne home values are still lower than their peak in 2022. KPMG predicts a 3.5% rise in 2025 and they expect even stronger growth of 6% in 2026.
Government Policies and Their Housing Market Impact
Policy decisions have played a key role in shaping the Melbourne property market forecast 2025:
Land Tax Changes
– Tax-free threshold drop: Reduced from $300,000 to $50,000, compared to $1M in NSW and $650,000 in QLD.
– Higher land tax rates: expanded tax burdens have pushed investors toward other states.
Stamp Duty Concession Removal
The Victorian state government scrapped the stamp duty concession that was available to purchasers of off the plan property.
– Previously, the stamp duty was based on the share of the development sites land value versus the apartment value (typically several thousand dollars).
– Now, buyers must pay full stamp duty, increasing upfront costs by tens of thousands of dollars.
Rental Market Squeeze
– In 2024, Melbourne had 15,000 fewer rental properties than in 2023.
– Higher taxes drove landlords out, worsening affordability for first home buyers trying to save for deposits.
Melbourne’s Rental Market and Population Growth
With Australia’s borders reopened, migration to Melbourne is increasing:
– Melbourne is Australia’s top destination for overseas migrants, increasing housing demand.
– Rental vacancy rates have plummeted, causing rent prices to rise.
Investment Insight
High land taxes can scare off investors. However, the rental market is still tight. This means that yields are getting better for those who keep their property.
Melbourne Property Forecast 2025
Investmentment Opportunities | Where to Buy in the Next 12 Months?
If the Melbourne property market forecast 2025 signals a turnaround, where should buyers look?
Avoid:
– Inner city high density apartments: oversupply continues to dampen rental growth.
– Far outer suburbs (house & land packages): urban sprawl limits future capital gains.
Consider:
– Middle-ring suburbs (5km – 15km from CBD), these areas are expected to recover fastest.
– Suburbs with infrastructure investment. Locations benefiting from the Suburban Rail Loop and transport hubs.
Top Suburbs for 2025:
– Brunswick, Preston, Mount Waverley, Essendon, Box Hill – these have strong rental demand with limited supply.
– Clayton & Burwood – these are boosted by infrastructure projects coming up.
What's Next for Melbourne Property?
Several factors will determine whether 2025 is the year Melbourne’s market rebounds:
– Interest rate movements will have an impact. If the RBA eases rates, buyer confidence will improve.
– Property investors who want to invest in the Victorian market may soon be discouraged. The new land tax policy will lead to higher tax bills for most property investors in Victoria.
– Continued migration growth got tighten the rental market. In the last two years, Australia’s borders have reopened. As a result, overseas migration has increased a lot. As Melbourne receives the largest share of overseas migration, this places additional pressure on a tight rental market.
Melbourne remains a challenging but promising market. Investors and buyers should focus on areas with limited supply, strong rental demand, and infrastructure investment.
If you’re planning to enter the Melbourne property market in 2025 but are struggling with securing the full deposit amount, a deposit bond could be the solution. Deposit bonds allow home buyers to secure their dream property without needing an upfront cash deposit. Learn more about how deposit bonds work and how they can help you.
The content of this blog reflects the personal views of the author and is for information purposes only. It does not constitute financial, investment or professional advice. Readers should conduct their own research and consult a qualified financial or property adviser before making any decisions to invest in property. The author and the blog are not responsible for any actions taken based on the content.
