As a buyers/vendors advocate, there is an expectation that in January I’ll publish a post outlining what is going to happen in the inner city residential market in 2025.

The reality is that like anyone else, I don’t know with any certainty.

And regardless of what is going to happen in 2025, I don’t think it is the right question.

Property is by its very nature - in part because of the relatively high costs and efforts required to transact in and out the market -  suited to a long term hold.

It’s also impossible to time the market in a 12 month timeframe.

Perhaps the better question is: Can I afford to buy and hold for the long term, the right property in the right place.

So the lens applied to “what’s going to happen in the market” requires a far longer view than 2025.

In terms of that longer term view I think we can be confident that:

1. Australians are very comfortable with residential property as a store of wealth and as a means of enhancing their lifestyle and feeling secure. This will continue.

2. Demand for Melbourne property will consistently increase. The Centre for Population (Federal Government) forecasts Melbourne’s population to increase by 1 million to 6.5 million by 2034.

3. Melbourne property supply currently can’t keep up with demand. The supply problem looks likely to increase, a result of the increase in population. But also issues with rising building costs (both labour and materials) and the torturously slow planning and building regulation environment.

Melbourne inner city property pricing will likely go up, go down and stay the same in individual years over the next 10 years.

However it’s highly likely to be far more costly in 2035 than it is in 2025.

Here’s my guesstimates as to what could happen in 2025 - put forward on the basis that it’s not the correct lens!

The inner city Melbourne market finished 2024 flat to very flat.

The broad exception being “move straight in” renovated family homes in premium localities - which always tend to outperform the general market.

Even for these properties I wasn’t seeing the FOMO (Fear Of Missing Out) present when the market is balanced or strong. Melbourne auction clearance rates have been sitting at circa 60% throughout 2024. That’s a clear sign of a weak market.

FOMO has been replaced by FOOP (Fear of Over Paying).

So what needs to change to change the market?

On one Saturday in late 2024 I attended eight auctions - at six of them the auctioneers pitch was that now was a great time to buy as prices were going to rapidly and significantly increase as soon as an interest rate cut was announced.

Sorry auctioneers - I think that’s an overly optimistic view. I don’t think a single interest rate reduction in 2025 is sufficient to spark a material market revival. I think it would likely require at least two.

The psychology of Melbourne generally also needs to change to give the market confidence.

I think Melbournians at the start of 2025 are - in a general sense - fairly anxious  and uncertain. This is a response to events overseas, cost of living concerns, anaemic Australian economic growth, the huge increase in Victorian Governments debt etc.

Residential property markets like certainty. 2025 looks to have a relatively high level of circumstances and events that don’t provide for much certainty including an Australian federal election, a new Trump government and broad societal changes looming, e.g. the impact of AI.

If the market does bounce back in 2025, it’s likely to a more subdued bounce that what we have seen previously.

The relatively dire housing affordability situation in a general sense just doesn’t leave sufficient room for a big bounce.

If I had to guess I suspect Melbourne property prices in January 2026 will be about the same as they are now.

Always interested in hearing your thoughts on the market or answering any questions on Melbourne inner city residential property. Don’t hesitate to give me a call or text 0457 513 124.