Melbourne’s property market faced challenges in Q3 2023, but potential relief is expected from 2024 to early 2025.

While some factors stabilised in Q3, ongoing challenges (including the future cash rate and inflation) persist. The market continues to adjust to recent cash rate movements which will take time before positive momentum is fully restored.

Market sentiment improved following the stable cash rate in Q3, driven by expectations of reaching the cash rate peak and broader policy stability. However, inflationary pressures led to an additional rate rise in November – this is attributed to local factors rather than global supply chain issues.

While the RBA acknowledges the potential for future rate increases if needed, the broader futures market suggests the cash rate has peaked – pointing to the potential for reduction through H2 2024.

Delivering new supply remains challenging, with elevated (albeit easing) construction costs and high funding costs limiting the feasibility of new projects.

Although easing, the anticipated strong population growth will continue to place pressure on the rental market; maintaining low vacancy rates and firm weekly rents until significant new supply is introduced.

This article references findings from our Q3 2023 Residential Market and Economic Review.