The property market has always been a roller coaster and while it’s impossible to predict the future with 100% accuracy, there are economic trends and policy updates which are likely to influence the market over the next 12 months. 

Looking back on 2024

In 2024, house prices began to stabilise in Victoria after years of sharp increases, and some areas even experienced a slight dip in value. In Melbourne, November statistics from CoreLogic showed a three-month reduction of 0.8% and a year-on-year drop of 1.9% for average home values. Regional areas remained relatively resilient, with average growth of around 2% year on year. 

On the rental front, vacancy rates have been slowly rising across the state, offering some relief to renters after years of tight supply. In Melbourne, the rental vacancy rate increased from 1.11% in October 2023 to 1.64% in October 2024. While things are tracking in a positive direction for desperate renters and property managers seeking new listings, conditions are still challenging. 

Forecast for 2025

Changes in 2025 will be influenced by legislative changes, interest rate adjustments and ongoing housing availability challenges. 

From a legislative perspective, the following updates may impact investors, renters and property management agencies:

VRLT: From 1 January 2025, the Vacant Residential Land Tax (VRLT) will be expanded to encompass all vacant residential properties across Victoria. Previously limited to inner and middle Melbourne, this tax will now apply statewide to properties unoccupied for more than six months in the preceding calendar year. The tax rate is progressive: 1% of the property's capital improved value (CIV) in the first year, increasing to 2% in the second consecutive year, and 3% in the third. 

This may trigger the owners of vacant properties to sell or decide to find long-term renters. 

Short-term accommodation levy: A 7.5% levy on short-term accommodation will also apply from the beginning of next year. This update may tip the 35,000 or so owners of Airbnb and Stayz properties to do their sums and wonder, ‘Is it worth it?’. The change could have the flow-on effect of returning more long-term rentals to the market. 

Minimum rental standards: New minimum rental standards are set to take effect from 30 October 2025. Rental property owners will be required to implement energy-efficient upgrades, such as installing ceiling insulation, draughtproofing and efficient heating and cooling systems. While these changes are intended to improve renter comfort and reduce energy costs, they may also lead to increased expenses for property owners.

No-fault evictions banned: Victorian officials are also pushing to ban no-fault evictions by the start of 2025. This will make it difficult to evict ‘nuisance’ renters who make life difficult but don’t directly breach the terms of their contract or fail to pay the rent on time. 

Interest rates, construction costs and population growth

The above factors may contribute to more long-term rental properties coming onto the market, making life easier for renters and busier for property managers. 

However, there are three more ‘variables’ in the mix:

Interest rates: Rates are forecast to drop in 2025, and some lenders are already dropping their variable rates independently of Reserve Bank updates, which may trigger Victoria’s stagnant house prices to pick up. 

Lower rates will ease pressure on rental property owners with significant mortgages and give them more breathing room to deal with levies and property upgrade costs. This could prompt them to hold onto their investments rather than selling. 

Construction approvals: According to the Australian Bureau of Statistics, total dwelling unit approvals rose by a seasonally adjusted 6% in Victoria in September. Meanwhile, the value of total residential building was flat, which may indicate costs are coming under control again. More construction activity means more homes are available and improved affordability. 

Population: Melbourne is reportedly growing at a faster pace than Sydney. New migrants from overseas and interstate will continue to put pressure on housing availability. The population will adapt by living in multi-generational homes, choosing smaller accommodation options and sharing with housemates for longer, but more housing will definitely be needed.  

What does this all mean? 

There is potential for the rental market to become slightly less competitive in 2025, but the questions remain: By how much, and where will new PUM opportunities be springing up?

If growth is your goal in 2025, you’ll need to be strategic and target the investors who may be ready to switch from short to long-term rentals or who may be affected by VRLT changes.  
However, with conditions relatively unpredictable, it is important to focus on client retention as well as growth. Over the next year, maintaining good relationships with property owners and renters, providing excellent customer service and ensuring contracts are up to date will help your rent roll maintain its value.