The Property Market Outlook For 2024 & 2025

7 minute read.

The past few years in the property market has been a challenge! As we look forward, many people are asking what we can expect from the Victorian property market in the future.

Will housing prices finally drop from interest rate pressure? Or will easing inflation lower the cost of borrowed money cuasing house prices to skyrocket. 

While it is nearly impossible to predict what the housing market will do in the next few years, we can look at what the experts say and speculate on what 2025 may deliver to the Melbourne and Victorian housing markets.

FREE: Our property expert Mark Ribarsky discusses Melbourne’s real estate market March 2022 quarter and how rising interest will affect the property market. 

What happened to the Victorian housing market In 2023?

From the start of 2023, house prices were stagnant under the shadow of monthly interest rate hikes, interest rates were still at record lows. 

The Reserve Bank of Australia increased the cash rate 13 times in just over a year in efforts to tackle rising inflation. 

Experts predicted increasing interest rates would soften the property market toward the end of 2023. We heard alot about the mortgage cliff fixed rate bank loan holders faced when there there loans switched to a variable rate.  

The Victorian state government introduced a tax to all property investors and increased land tax adding to the cost of property ownership.  

According to the Real Estate Institute of Victoria the median house price at quarter 3 of 2022 at $994,000, the same quarter 12 months later median house price was $934,000. A reasonable decline. The median house price peaked quarter 4 of 2021 at $1,134,000.

As new home construction slowed due to bankrupt builders, the established homes market experienced a supply shortage keeping price strong in the face of interest rate hikes.  

Why The Property Market Will Increase by 2025

Unfortunately, there is no real way to see what will happen in the future. All we can do is speculate based on past information and what experts predict will happen.

The prediction by KPMG suggests that Melbourne’s housing market is expected to outperform Sydney’s over the next two years, and there are a couple of key factors mentioned as drivers for this anticipated growth:

  1. Higher Demand: Increased demand for housing in Melbourne could be due to various factors such as population growth, economic opportunities, or lifestyle preferences. A rising demand for housing generally puts upward pressure on prices.
  2. Constrained Supply: The prediction mentions more constrained supply, indicating that there may be limitations on the availability of new housing units or properties in Melbourne. When supply is restricted, and demand remains strong, it can lead to an increase in property prices.

These factors collectively contribute to the forecasted acceleration in housing prices in Melbourne. It’s important to note that predictions in the real estate market are subject to various external influences, and actual outcomes may vary based on economic conditions, policy changes, and unforeseen events.

Inflation is declining. 

The Australian Bureau of Statistics recorded inflation at 5.4% in September quarter of 2023, it peaked in December of 2022 at 7.8%. The Reserve Banks goal is to keep annual consumer price inflation at between 2 and 3 per cent, on average, over time. 

Lower inflation often leads central banks to consider lowering interest rates to stimulate economic activity. As you rightly pointed out, this can have a significant impact on the housing market. 

When interest rates are lower, borrowing becomes more attractive, and it tends to stimulate demand in the housing market. Lower mortgage rates make homeownership more accessible, which can drive up housing prices as demand increases.

It’s an interesting dance between inflation, interest rates, and the housing market. The expectation seems to be that the decline in inflation, coupled with potential interest rate adjustments, could contribute to the growth in property prices, as borrowing becomes more affordable. However, as with any economic prediction, external factors and unexpected events can influence outcomes.

Shortage of established property. 

The delicate dance between supply and demand in the housing market is indeed a pivotal factor in determining property prices. The decision by the Albanese Government to welcome a significant number of new migrants reflects a substantial shift in the landscape of housing demand in Australia.

The warning from Infrastructure Victoria about the need for a substantial increase of 44,000 new homes annually in Melbourne emphasizes the challenges posed by rapid population growth.

The demand for housing is clearly outpacing the current supply, and addressing this gap is crucial for maintaining a balanced and sustainable property market. 

The concern raised by SQM Research managing director Louis Christopher about the potential impact on property prices due to increased immigration is valid. If the surge in immigration exacerbates the already low rental vacancy rates in Melbourne, it could indeed put upward pressure on property prices, making housing even more competitive.

So when is the right time? 

Trying to buy at the right time is often the first mistake many make. Is there ever an ideal time to buy a property? The answer most reflect on is when they should have purchased property. As the real estate saying goes, today’s high prices are tomorrow’s bargains. 

The economic signs are all pointing to a significant rise in property prices by the end of 2025.  

You could spend the time looking at the last ten years or so of data and trying to match up property values with changes in inflation and interest rates. If you spot any patterns, it may give you an idea of what may happen in the future or what may occur with property in the near future. 

Choosing the right time to buy and sell could see you make or save you tens of thousands of dollars. 

Help Getting Into The Property Market. 

Using the services of a buyer’s agent is an excellent method for getting the correct information about the housing market. A buyer’s agent will study the markets and determine the best location for you to buy and make the most out of your investment dollar.

When you talk to your buyer’s agent about what you require in a property, they can suggest several areas based on past experiences and current market trends. In most cases, buying property means finding the right one for you and less about the market value in the short term.

If you’re interested in buying property as an investment or owner-occupier, then you can contact our team, and we’ll talk you through what is on offer today and what may be the best area for your next purchase.

To help you stay ahead of the game, consider getting an experienced and knowledgeable real estate expert on your side. A Buyer’s Agent is the perfect professional you can rely on if you have hesitations about buying property. They can assist you with the entire property buying process from start to finish. Finding the right property for you is important but so is buying it at the right time. 

Feel free to ask them below. 

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