What lies ahead for the Australian Property Market in 2025?

As we step into 2025, Australia’s property market stands at a crossroads, defined by its dynamic and multifaceted nature. Each state, territory, and property type marches to its own rhythm, influenced by a mix of local factors like population growth and supply shortages, as well as global drivers such as interest rates and inflation.

With a Federal Election on the horizon, market activity may slow in the short term due to political uncertainty, but the potential for an interest rate drop could be the catalyst needed to restore confidence. Melbourne, in particular, is poised for a recovery, with its undervalued market presenting significant opportunities for buyers and investors looking ahead.

From my 40 years as a Commercial and Residential Property Valuer and nearly two decades as a Licensed Estate Agent, I've identified key drivers that can influence the market:

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POSITIVE INDICATORS FOR 2025

These factors are expected to provide a strong foundation for market stability and potential growth in 2025.

• Supply shortages: The supply of new settled apartments in Melbourne is at its lowest in over 15 years.
• Population growth: Increased migration and urban expansion will start to flow through
• Low unemployment rate and rental vacancy rates (<1% in many areas).
• Rising rents: Rarely do higher rents correlate with falling house price
• Clearance rates exceeding 60%, a marker of healthy market activity.
• Infrastructure spending supporting local economies and demand.
• Government change with fresh policy and new leadership will enhance consumer confidence.

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2025 CHALLENGES

These challenges may temper market activity, highlighting the importance of strategic planning and adaptability.

• Interest rates remaining at current levels without relief will dampen confidence.
• Clearance rates below 50% in weaker segments.
• Oversupply concerns in specific markets, particularly in the holiday home sector.
• Low affordability and declining consumer savings impacting buyer confidence.
• Inflation Rising energy costs due to war or rising food costs due to Drought conditions is something to monitor

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Despite the challenges, I believe the positive drivers outweigh the negatives, reducing the likelihood of a significant price decline in 2025. Whilst most commentators are predicting Melbourne to perform well in 2025 the growth forecasts have been modest at less that 5%. I am more optimistic about the Melbourne market and believe it will outperform many other cities this year. I forecast price growth in the range of 5%- 8%

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