Melbourne’s property market is expected to perform the worst of all Australian capital cities in 2025.

New research from PropTrack revealed the city’s home prices could fall by 1 per cent or rise by just 2 per cent next year following a decline of 1.6 per cent in 2024.

Brisbane and Adelaide’s median home values surpassed Melbourne’s in 2024, and Perth could follow suit as soon as May if both markets continue at the same trajectory.

Key to the fall is the number of homes listed for sale, which in Melbourne has reached its highest point since 2012 after increasing 9.5 per cent this year.

PropTrack economic research director Cameron Kusher said this meant homebuyers could be a lot more selective about what they wanted to purchase, leading to decreasing prices. Sellers needed to adjust to those conditions, he said.

“Melbourne hasn’t seen the same level of price growth in the last five years as we’ve seen elsewhere, so people don’t have as much equity in their homes,” Mr Kusher said.

“The state government decided to put up taxes on investors and that’s led to a lot of people selling properties in Victoria but it’s also led to few people wanting to come and invest. I think for investors, the hits just keep on coming.”

New laws that favour tenants have also hit investors, on top of a surge in windfall gains tax and land tax.

Those include ending nofault evictions, penalising landlords for withholding bonds without evidence, and capping rent payments to a maximum of four weeks if a tenant breaks a lease.

Property Investment Professionals of Australia (PIPA) chair Nicola McDougall said Melbourne continued to suffer from a variety of negative elements such as taxes, rental reforms and an underperforming construction sector.

“That said, investors are quite bullish about Melbourne, which may ignite a market recovery as occurred in Perth a number of years ago,” Ms McDougall said.

Hotspotting director Terry Ryder said though Melbourne’s property market had not had a good year, he believed it would start to improve next year thanks to the price difference with Sydney and higher population growth.

“This will occur despite Melbourne having the worst state government and the highest taxes in the nation,” Mr Ryder said.

Real Estate Institute of Victoria (REIV) chief executive Kelly Ryan said it was imperative that any new property reforms encouraged investors to stay in or return to the market.

The REIV is pushing for the state government to offer tax incentives for developers of multi-unit buildings, land tax discounts for investors who keep properties in the longterm rental market, and incentives for landlords who sign leases for three or more years.

Originally Published: Sarah Petty | realestate.com.au | 18 December 2024

https://www.realestate.com.au/news/melbournes-property-market-tipped-to-be-worst-performer-of-all-aussie-cities-in-2025

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