After what felt like a lightning-quick 12 months, 2025 is here, and Melbourne’s property prices look set to stay within reach of buyers until we see movement on interest rates.
Current Property Market Conditions in Melbourne
It remains a good time to buy property in Melbourne, with prices continuing to fall and plenty of stock available in the market.
According to ANZ senior economist Adelaide Timbrell, the property landscape will remain the same until interest rates are cut and the market picks up pace again.
“This will be the case as long as we don’t see unemployment drop to those really low levels during that high inflation period and as long as inflation keeps going in that right direction,” she told Domain.
“These two should be enough for the RBA to cut in 2025. Rate cuts and income growth will help with borrowing capacity, which supports an increase in housing prices.”
Interest Rates and Their Impact on the Property Market
While interest rates remain stuck at 4.35 percent, households will continue to struggle with the cost of living. Ms. Timbrell noted that this leads to an increasing number of larger households, with people moving back in with parents or into share-houses to save money.
This trend further feeds into the buyers’ market because it creates more housing supply and reduces demand as more people are squeezed into fewer homes.
Buyers Holding Out for Rate Cuts
PRD Real Estate’s Diaswati Mariasmo told Domain that as we enter 2025, many buyers are sitting on the sidelines, waiting for interest rate cuts.
Ms. Mariasmo said Australia is likely to follow international rate cuts from countries like the USA and UK.
“We were six months behind in increasing, so we’re six months behind in cutting. Our inflation is much closer to the 2 to 3 percent benchmark that the RBA considers as a healthy target,” she said.
“All the buyers are really holding out for that. You can see that because there are a lot of sticky buyers where they are waiting for it to happen,” she told Domain.
“They’re going to opens and auctions, but the clearance rate has been around 60-ish percent in 2024 in Sydney and Melbourne, and it hasn’t really moved.”
First-Home Buyers Poised to Act Quickly
Ms. Mariasmo noted a particular increase in first-home buyers in the market since 2019, adding that these buyers are most likely to be the first to put offers in when interest rates are finally cut.
The big four major banks all predict Australian property prices to rise between 3-6 percent in 2025.
Australian Property Price Forecasts in 2025
| Bank | Forecast |
|---|---|
| ANZ | +5-6% |
| CBA | +5% |
| NAB | +4.2% |
| Westpac | +3% |
