Key Highlights

  • Melbourne property market is poised for a strong recovery, with significant potential for growth
  • Early signs of increased confidence in both buyers and sellers are emerging, and auction clearance rates have remained strong.
  • Current market conditions present unique opportunities for strategic investors.
  • The Melbourne housing market is currently undervalued, offering significant potential for growth. Waiting for interest rates to fall will only put you in competition with owner-occupiers for the best properties.
  • Strong population growth and limited supply are driving market dynamics
  • Premium suburbs continue to show resilient performance
  • Two key Victorian government policies aimed at boosting housing supply:
    • A 12-month stamp duty reduction on off-the-plan units, townhouses, and apartments, regardless of their price.
    • The creation of 50 new activity centres where the planning process for multi-storey residential developments will be streamlined.
  • Expert forecasts predict strong Melbourne property growth over the next three years: Houses +21% and Units +20%

Market Overview

Melbourne’s property market is entering an interesting phase of recovery, presenting strategic opportunities for informed investors. While the market has underperformed compared to other capital cities recently, this creates a unique window of opportunity for 2025, especially given Melbourne’s strong long-term fundamentals.

Why Melbourne is Primed for Growth

Strong Population Growth

  • Victoria experienced the largest population increase in Australia, growing by 181,800 people
  • Melbourne’s population is projected to reach 8 million by 2050
  • International migration has resumed, driving housing demand

Supply Constraints

  • New dwelling completions in 2024 are at their lowest level in 10 years
  • Construction costs have risen by up to 40% since Covid
  • Current approved dwellings are 15% below the 10-year average

Market Dynamics

  • Vacancy rates remain tight at 1.5%
  • Rental rates have grown by more than 9% for both houses and units
  • Significant price gap between Melbourne and Sydney creates potential for growth

Premium Suburbs Leading the Way

Several Melbourne suburbs have shown remarkable resilience and growth:

  • Toorak and South Yarra continue to be top performers
  • Eastern suburbs such as Canterbury, Balwyn, and Surrey Hills show strong price appreciation
  • Family-friendly areas in the middle ring are experiencing sustained demand

What to Look For in 2025

Best Performing Property Types:

  1. Family-Friendly Homes

    • 3-4 bedroom houses in established suburbs
    • Properties with renovation potential
    • Access to amenities and transport

  2. Quality Townhouses

    • Popular among young families
    • Cost-effective alternative to houses
    • Strong demand in gentrifying suburbs

  3. Premium Apartments

    • Well-located two-bedroom apartments
    • Boutique developments
    • Close to lifestyle amenities

Investment Outlook

Expert forecasts suggest Melbourne property values will show strong growth over the next three years:

  • Houses expected to grow by 21%
  • Units projected to increase by 20%
  • Continued pressure on rental markets supporting yields

Strategic Considerations

When investing in Melbourne’s property market:

  • Focus on areas with strong infrastructure development
  • Consider properties below replacement cost
  • Look for suburbs with gentrification potential
  • Prioritize locations with multiple income streams

Conclusion

Melbourne’s property market presents compelling opportunities for 2025, especially for those who can identify undervalued assets in high-potential areas. With population growth, limited supply, and economic fundamentals supporting the market, strategic investors who act decisively stand to benefit from the market’s recovery phase.

While challenges exist, Melbourne’s status as one of the world’s most liveable cities, combined with its robust economy and infrastructure development, positions it well for strong performance in 2025 and beyond.

For professional guidance on navigating Melbourne’s property market and identifying the right investment opportunities, contact our team of experts who can help you make informed decisions aligned with your investment goals.