The fate of Melbourne’s property market in 2025 rests almost exclusively on the shoulders of interest rates, according to the recent Christopher’s Housing Boom and Bust Report 2025 from SQM Research.
The Potential Impact of Early Rate Cuts in 2025
If interest rates are cut early in 2025, there’s a solid chance property markets around Australia, including Melbourne, could experience a new boom.
The report modeling shows Melbourne property prices rising between 2 and 6 percent if the official cash rate falls before the end of March 2025.
The Consequences of Delayed Rate Cuts
On the other hand, if the forecasts from an increasing number of economists come to fruition and rates refuse to come down until much later, Melbourne’s property market could drop in value by more than 5 percent.
While the big banks suggest a rate cut early in 2025 is still on the agenda, the Reserve Bank has been less confident, continuing to wrestle with inflation and unemployment figures.
SQM Research’s Insights on National Property Trends
If the RBA follows through on its warnings that 2025 might not see any rate cuts at all, SQM Research says the national property market would be significantly affected.
Managing director at SQM, Louis Christopher, told Australian Property Investor that if current levels of population growth continue and rates were cut mid-2025 or shortly after, prices would continue to rise in Perth, Brisbane, and Adelaide, with falls limited in Melbourne and Sydney.
A Window of Opportunity for Buyers
“To be sure, our two largest capital cities, along with Canberra and Hobart, will start 2025 off in the red; indeed, we are currently recording dwelling price falls in each of these cities,” Mr. Christopher said.
“Current interest rate settings are biting the community more in these cities which, on our measurements, are in overvalued territory and/or are experiencing slower economic growth compared to the cities that have enjoyed good economic growth through a buoyant commodities market and/or have had generous contributions from GST receipts.”
“However, once interest rate cuts do occur, we are expecting a speedy bounce in demand for Sydney and Melbourne, which both are still experiencing underlying housing shortages relative to strong population growth rates. This may well mean there is a good window for buyers at this time for our two largest capital cities.
“If rate cuts do not occur in 2025, it is unlikely a recovery will occur in Sydney and Melbourne at any time next year,” Mr. Christopher told Australian Property Investor.
Property Market Forecasts
for 2025
| City | Rate Cut Mid 2025 | No Rate Cut | Rate Cut by March |
|---|---|---|---|
| Perth | +14% to +19% | +7% to +11% | +15% to +20% |
| Brisbane | +9% to +14% | +5% to +9% | +11% to +16% |
| Melbourne | -5% to -1% | -7% to -3% | +2% to +6% |
| Sydney | -5% to -1% | -8% to -4% | +3% to +7% |
| Adelaide | +8% to +13% | +4% to +8% | +10% to +14% |
