Should you invest in Melbourne in 2025?

Melbourne has had an interesting few years. The residential property market in Melbourne maintained a lower growth rate than other major cities such as Sydney, Brisbane and Adelaide during the past years. The city faced multiple challenges during COVID-19 lockdowns and new housing supply increases along with heavier investor tax burdens which led to a less active market. However, after years of being less competitive than other major cities, it is now demonstrating signs of a strong market recovery.

Melbourne’s median house price is now very competitive when compared against the other capital cities and rental yields remain strong because of the tight rental market which has low vacancy rates and growing rental income. This makes it an appealing option for investors looking to secure a high quality investment property at a reasonable price.

Looking forward, we believe that the conditions that have led to this softening of Melbourne’s market are unlikely to continue. Most significantly, the fast-growing population of Melbourne will continue to see pressure on the housing market, with supply unlikely to keep up with demand. Looking at current trends, it’s likely that it will become Australia's most populous city by the end of the next decade. In addition to this, Australia’s inflation appears to have been brought in line with the reserve banks objectives, suggesting that additional interest rates decreases should occur over the next 12 months.

We believe that an opportunity currently exists for investors to purchase quality properties at reasonable prices in Melbourne, and that these investors should expect to see solid performance of these properties over the next 10 years. It is important to understand that not all properties in Melbourne will perform equally, and that investors should be strategic with their decisions, ensuring that they conduct thorough research and seek guidance when making these decisions.