Market Shifts, Trends & Opportunities
Melbourne Property Briefing | For those keeping an eye on Melbourne’s property market, now is the time to stay informed. With key economic shifts, interest rate movements, and market trends emerging, we’ve put together a comprehensive update to help you navigate the opportunities ahead.
Melbourne’s real estate market is always a topic of conversation. Whether it’s interest rates, land tax, or government policies, the debate never stops. However, what’s often missing is a forward-thinking perspective. While challenges exist, the market also presents compelling opportunities.
Why the Outlook is Positive
1. Interest Rates and Inflation Moving in the Right Direction
The Reserve Bank of Australia (RBA) has indicated that we are past the peak of interest rate hikes. Inflation is easing, and major financial institutions, including the Commonwealth Bank, predict a reduction of up to 100 basis points by the end of 2025, bringing the cash rate down to around 3.35%.
Further reinforcing this optimism, the RBA announced a 0.25 basis point rate cut in February, marking the first reduction in the current cycle. This signals a shift towards a more accommodative monetary policy, increasing borrowing power and buyer confidence. Lower interest rates will make property purchases more accessible and stimulate both the residential and commercial markets.
2. Business Confidence and the Federal Election Factor
Political uncertainty has been a factor in recent market hesitation. With the federal election imminent, market participants are closely watching policy directions. However, once the election is behind us, it will add to the “knowing” factor, providing greater stability and clarity for investors and buyers. Historically, post-election periods have seen an uplift in real estate activity as businesses and individuals gain confidence in economic conditions.
3. Commercial Real Estate on the Rise
The return to office-based work is gaining momentum, with major corporations reinforcing hybrid work policies. This shift is driving increased demand for office space and supporting recovery in commercial real estate. Retail and hospitality precincts are also set to benefit as office occupancy rates improve. Investors should keep an eye on well-located commercial assets as the sector stabilises.
4. A Strong Residential Market in Key Segments
Despite economic headwinds, Melbourne’s property market has remained resilient. KPMG forecasts house prices will rise by 3.5% in 2025 and 6.0% in 2026. However, units and townhouses are expected to see even stronger growth, with price increases of 4.6% and 5.5% respectively. With affordability constraints pushing more buyers towards these property types, demand is expected to remain strong.
Melbourne remains an international city with solid long-term fundamentals. Factors such as population growth, infrastructure investment, and strong rental demand continue to underpin a stable property market.
5. Economic Growth and Increased Consumer Spending
Australia’s economy is projected to grow gradually over the next two years, driven by rising wages and lower borrowing costs. With household incomes increasing, consumer confidence is expected to improve, leading to greater willingness to enter the property market. The RBA’s recent rate cut will further support this trend, directly boosting buyer sentiment and increasing market activity.
Opportunities for Buyers, Sellers, and Investors
Buyers: Falling interest rates create opportunities to enter the market with improved affordability.
Sellers: Leveraging the improving confidence and selling into a rising market could be greatly advantageous. With increased buyer demand, vendors who act early may achieve premium results before supply catches up.
Investors: The apartment and townhouse segments offer compelling opportunities, especially in high-demand inner-city locations.
Commercial Owners: Office space and retail demand will continue to improve as businesses regain confidence and workers return to offices.
Final Perspective
While challenges remain, the broader outlook for Melbourne’s real estate market is one of renewal and opportunity. With stabilising interest rates, a post-election confidence boost, and strong market fundamentals, the months ahead present a strategic window for buyers, sellers, and investors to act decisively. The RBA’s latest rate cut serves as a clear signal that conditions are improving. Looking beyond the headlines, those who take a forward-thinking approach will be best positioned to capitalise on the evolving market landscape.