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The Property Market Outlook For 2024 & 2025
The last few years in the real estate world have been tough! Looking ahead, a lot of folks are wondering about the future of the property market in Victoria.
Are home prices going to fall due to rising interest rates? Or, could slowing inflation make borrowing cheaper, leading to a surge in home prices?
Predicting the housing market’s movements in the next few years is almost impossible, but we can consider expert opinions and guess what 2025 might bring for Melbourne and Victoria’s real estate scene.
What happened to the Victorian housing market In 2023?
Since the beginning of 2023, house prices have been flat, overshadowed by continuous monthly interest rate increases, even though rates were still historically low.
The Reserve Bank of Australia raised the cash rate 13 times in just over a year to combat rising inflation.
Experts had forecasted that the climbing interest rates would cool down the property market by the end of 2023. There was a lot of talk about the “mortgage cliff” that people with fixed-rate loans would face once their loans switched to variable rates.
The Victorian state government also introduced a tax for property investors and raised the land tax, adding to the costs of owning property.
According to the Real Estate Institute of Victoria, the median house price in the third quarter of 2022 was $994,000, but by the same quarter a year later, it had dropped to $934,000, a noticeable decrease. The median house price reached its peak in the fourth quarter of 2021 at $1,134,000.
With new home construction slowing down due to builders going bankrupt, the market for established homes saw a shortage in supply, which kept prices robust despite the rising interest rates.
Why The Property Market Will Increase by 2025
Indeed, there’s no crystal ball to see exactly what the future holds. We can only make educated guesses based on historical data and expert forecasts.
KPMG’s prediction points to Melbourne’s real estate market doing better than Sydney’s in the next couple of years, with a few key reasons behind this expected growth:
Higher Demand: The demand for homes in Melbourne might go up due to factors like population increase, job opportunities, or the appeal of living in Melbourne. Generally, when more people want to buy homes, prices tend to go up.
Constrained Supply: The forecast also talks about a tighter supply, suggesting there might be fewer new homes or properties available in Melbourne. If there aren’t enough homes for all the interested buyers, prices are likely to rise.
These elements together suggest that Melbourne’s housing prices might see a significant rise. However, it’s important to remember that real estate forecasts can be swayed by many unpredictable factors, like changes in the economy, government policies, or unexpected events.
Inflation is on the downturn
The Australian Bureau of Statistics reported a 5.4% inflation rate in the September quarter of 2023, down from its peak at 7.8% in December 2022. The Reserve Bank aims to maintain annual consumer price inflation within the 2 to 3 percent range, averaged over time.
With inflation falling, central banks often think about cutting interest rates to boost economic growth. As you’ve mentioned, this can significantly affect the real estate market.
When interest rates drop, getting a loan becomes more appealing, which usually boosts demand in the property market. Cheaper mortgage rates make buying homes more feasible, potentially driving up property prices as more people look to buy.
It’s a complex interplay between inflation, interest rates, and the property market. The current trend of falling inflation, alongside possible adjustments in interest rates, could lead to higher property prices since loans would be more affordable. But, as always with economic forecasts, various external factors and unforeseen events can sway the final outcomes.
Shortage of established property
The balance between supply and demand is always key in the property market, and it plays a major role in setting property prices. The Albanese Government’s move to allow a significant number of new migrants is changing the demand for housing in Australia in a big way.
Infrastructure Victoria’s warning that Melbourne needs to add 44,000 new homes every year highlights the pressure from fast population growth.
It’s clear that the demand for homes is outstripping what’s available, and bridging this gap is essential for keeping the property market stable and sustainable.
Louis Christopher, the managing director of SQM Research, has a point when he worries about how increased immigration might affect property prices. If this surge in newcomers makes the already tight rental market in Melbourne even tighter, it could push property prices up further, making the competition for housing even fiercer.
So, when’s the best time to jump in?
The quest to time the market perfectly is often the initial blunder many people encounter. Is there really a perfect moment to buy property? Most people end up reflecting on when they should have bought. As the saying in real estate goes, what seems expensive today might look like a steal tomorrow.
All economic indicators seem to be hinting at a notable increase in property prices by the end of 2025.
You might consider poring over the last decade or so of data, comparing property values against shifts in inflation and interest rates. Identifying any trends might offer clues about future movements in the property market.
Making the right call on when to buy or sell could either save you or earn you a hefty sum.
Need Help Getting Into The Property Market?
Getting into the property market can seem daunting, but here at Elliman & Co we can make it a lot smoother. We dive deep into the market to find the best spot for your investment, ensuring your money is well spent.
A chat with our agents about your property needs can open up a variety of options. They use their knowledge and current market trends to point you in the right direction. Often, the key is to find a place that feels right for you, rather than just focusing on its market value at the moment.
If you’re looking to invest or find your next home, our team is here to guide you. We’ll show you what’s available now and help you figure out the best place for your investment.
Having a seasoned property expert in your corner can really give you an edge. An Elliman & Co property expert is the ally you need, especially if you’re unsure about making a purchase. They’ll be with you every step of the way, from beginning to end, ensuring you not only find the right property but also buy at the right time.
