Perhaps you want to invest in Melbourne’s property market but don’t know where to start.
Or maybe you’re wondering what the best Melbourne suburbs to invest in are for 2025.
Let me talk you through it.
While over the last four decades, Melbourne has been Australia’s strongest-performing housing market, over the last couple of years it has underperformed.
In fact, over the last 12 months dwelling prices have been basically stagnant, while many other capital cities enjoyed double-digit capital growth.
Note: Melbourne's property values have risen 10.6% since the onset of COVID-19 in March 2020, but they are still -5.1% below their previous peak in March 2022.
However, the fact that the Melbourne housing market has not performed as strongly as some other capitals over the last 2 years creates a window of opportunity for strategic property investors looking for significant upside potential.
In fact, a new report from Oxford Economics is forecasting that Melbourne could see another $60,000 added to its typical property price in the 12 months following a rate cut.
But the city will have to limp through the rest of the financial year, with virtually no growth expected before June 2025.
While CPI dipping below 3% had been tipped to preclude an interest-rate cut, the firm’s senior economist Maree Kilroy has warned she doesn’t believe the first reduction in home loans will be made until June next year.
But when they do come through, she said Melbourne’s units and houses were likely to rise in value by 7% in the 2026 financial year.
The 7% uptick would add about $59,688 and take the city’s typical residence cost to $852,700.
Again, this creates a window of opportunity to get into the property market before the Melbourne market picks up again.
As Melbourne moves through its fragmented recovery phase, a clear flight to quality properties continues to occur.
A-grade homes and "investment grade" properties are still in short supply thanks to prevailing strong demand, while B-grade properties are taking longer to sell and informed buyers are avoiding C-grade properties altogether.
Auction clearance rates also give a great "in time" indication of the mood of Melbourne property buyers and sellers and Melbourne's auction market data show that the market has recovered its "mojo."
Melbourne’s clearance rates held up well throughout 2023 and have been stable throughout 2024.
Now, the question I hear many property investors ask is:
What is going to cause property values to increase moving forward?
I believe demographics (such as population growth, family formation, how we want to live, and where we want to live) as well as the wealth of the nation will be the main long-term drivers of our property market and will be much more important than the short-term fluctuations created by interest-rate rises, inflation or government intervention.
The rising tide that lifted all ships in the last boom has now gone, as has the period of rising household incomes and low interest rates that we enjoyed over the last decade.
That means our property markets will be much more fragmented moving forward, and capital growth will be dependent on local factors, including demographics, gentrification, neighbourhood, and wage growth of the people in these locations.
Here, I’ve broken down what I see as the best suburbs to watch in Melbourne, with help from data from domain.com.au and realestate.com.au.
Top suburbs in Melbourne by annual property price growth
HOUSES
| Suburb | Median house price | Quarterly growth | Annual growth |
|---|---|---|---|
| Blackburn | $1,400,000 | 1.08% | 7.69% |
| Glen Waverley | $1,550,000 | -1.90% | 5.80% |
| Ringwood | $960,000 | 1.05% | 5.49% |
| Preston | $1,100,000 | 0.00% | 4.76% |
| Reservoir | $850,000 | -1.17% | 1.79% |
| Mitcham | $1,050,000 | 0.00% | 0.23% |
| Moonee Ponds | $1,500,000 | 0.00% | 0.00% |
| McKinnon | $1,700,000 | -2.86% | 0.00% |
| Bentleigh | $1,500,000 | -0.23% | -0.23% |
| Mount Waverley | $1,650,000 | -3.17% | -0.52% |
| Essendon | $1,699,000 | -0.06% | -1.23% |
Source: Domain, RealestateInvestar
UNITS
| Suburb | Median unit price | Quarterly growth | Annual growth |
|---|---|---|---|
| Mount Waverley | $830,000 | 13.69% | 14.48% |
| Mitcham | $680,000 | 4.61% | 8.80% |
| Moonee Ponds | $540,000 | 8.21% | 8.43% |
| Preston | $450,000 | 2.27% | 4.65% |
| Blackburn | $520,000 | 0.00% | 2.97% |
| Essendon | $455,000 | 1.11% | 1.11% |
| Ringwood | $530,000 | -1.86% | 0.00% |
| Reservoir | $500,000 | 0.00% | 0.00% |
| Bentleigh | $595,000 | 0.84% | -0.84% |
| McKinnon | $662,500 | -3.29% | -3.99% |
| Glen Waverley | $660,000 | -2.95% | -5.04% |
Source: Domain, RealestateInvestar
Top suburbs in Melbourne by rental yield
HOUSES
| Suburb | Vacancy rate | Weekly rent (houses) | Annual rent growth | Rental yield |
|---|---|---|---|---|
| Ringwood | 1.12% | $580 | 11.53% | 3.14% |
| Reservoir | 0.90% | $500 | 11.11% | 3.05% |
| Preston | 1.13% | $600 | 9.09% | 2.83% |
| Mitcham | 1.05% | $565 | 13.00% | 2.79% |
| Bentleigh | 0.87% | $740 | 8.82% | 2.56% |
| McKinnon | 1.32% | $800 | 10.34% | 2.44% |
| Moonee Ponds | 1.21% | $675 | 12.50% | 2.34% |
| Mount Waverley | 0.71% | $650 | 12.06% | 2.32% |
| Glen Waverley | 1.02% | $660 | 10.92% | 2.21% |
| Blackburn | 1.09% | $595 | 12.26% | 2.21% |
| Essendon | 1.37% | $650 | 8.33% | 1.98% |
Source: Domain, RealestateInvestar
UNITS
| Suburb | Vacancy rate | Weekly rent (units) | Annual rent growth | Rental yield |
|---|---|---|---|---|
| Preston | 1.13% | $450 | 9.75% | 5.20% |
| Essendon | 1.37% | $435 | 10.12% | 4.97% |
| Bentleigh | 0.87% | $550 | 11.11% | 4.80% |
| Moonee Ponds | 1.21% | $490 | 13.95% | 4.71% |
| Ringwood | 1.12% | $470 | 11.90% | 4.61% |
| Glen Waverley | 1.02% | $580 | 11.53% | 4.56% |
| Blackburn | 1.09% | $455 | 8.33% | 4.55% |
| McKinnon | 1.32% | $575 | 10.57% | 4.51% |
| Reservoir | 0.90% | $430 | 14.66% | 4.47% |
| Mitcham | 1.05% | $475 | 15.85% | 3.63% |
| Mount Waverley | 0.71% | $540 | 12.50% | 3.38% |
Source: Domain, RealestateInvestar
Here are the full details of all the suburbs to watch in Melbourne, listed in alphabetical order.
1. Bentleigh
Total population: 27,635
Average age: 29-40
Median house price: $1,500,000
Median unit price: $595,000
Bentleigh is a high-demand market with good transport links, local schools, and plenty of amenities on the doorstep.
While the suburb mainly consists of established couples and families, it is a gentrifying suburb with many young families moving into the older houses or into the many new townhouses being built in Bentleigh.
It is serviced by good schools, great local shopping, and proximity to both Southland and Chadstone shopping centres.
2. Blackburn
Total population: 14,972
Average age: 40
Median house price: $1,400,000
Median unit price: $520,000
Located around 17km east from Melbourne’s CBD, Blackburn is a leafy suburb which offers a wealth of amenities, attractions, schools, shops and cafes.
The area has long been sought-after for those families looking for the suburban dream in close proximity to the city and continually experiencing strong owner-occupier demand.
3. Essendon
Total population: 21,240
Average age: 39
Median house price: $1,699,000
Median unit price: $455,000
Just 8km from Melbourne’s centre is Essendon, a popular western Victorian suburb among families and professionals who want to be close to the CBD, reputable schools and ample lifestyle amenities.
Home to one of Australia's most well-known football clubs, the Essendon Bombers, Essendon is known as an up-market western suburb with wide, tree-lined streets, city views, and large mansions.
Today, property in the area still fetches impressive price tags and decent price growth.
4. Glen Waverley
Total population: 40,333
Average age: 40-59
Median house price: $1,550,000
Median unit price: $660,000
Glen Waverley is orientated around young families and professionals.
The area has a low crime rate and sits in the catchment for some of the best schools in the city.
The suburb sits just 19km southeast of the CBD and is residential in nature with substantial areas of commerce centred around the Glen Waverley Railway Station.
A little closer to the city and offers access to The Glen Shopping Centre, Glen Waverley Golf Course, and Central Reserve.
5. McKinnon
Total population: 6,060
Average age: 40-59
Median house price: $1,950,000
Median unit price: $824,000
McKinnon has easy access to public transport and is within a short distance of the city.
It has several parks and schools, cafes and shops, and many other facilities within arm’s reach.
Like the surrounding suburbs of Bentleigh and Ormond, McKinnon is gentrifying with many new homes and townhouses being built.
The McKinnon High School catchment zone, which has recently been extended, is a great drawcard for both home buyers and tenants.
6. Mitcham
Total population: 17,319
Average age: 40-49
Median house price: $1,050,000
Median unit price: $680,000
Mitcham is located in the middle ring of eastern suburbs in Melbourne, where gentrification and infrastructure upgrades are plentiful but property prices are still affordable.
The combination means the suburb is experiencing strong owner-occupier demand which will only continue to push up property prices and rental demand in the area.
7. Moonee Ponds
Total population: 6,224
Average age: 38
Median house price: $1,500,000
Median unit price: $540,000
Another western suburb, Moonee Ponds, known for its historic mansions and expansive parklands, is also popular among families and professionals alike thanks to its easy access to the CBD, reputable schools and simple lifestyle amenities.
8. Mount Waverley
Total population: 33,625
Average age: 40-59
Median house price: $1,650,000
Median unit price: $830,000
Mount Waverley is another very family-friendly area where locals are mainly older couples and families with some younger single people.
The area has a relaxed lifestyle with lots of parks, schools, golf courses, shopping, and access to public transport.
9. Preston
Total population: 35,544
Average age: 37
Median house price: $1,100,000
Median unit price: $450,000
Preston is located around 9 km north-east of Melbourne's CBD within the City of Darebin and is known for many things, including its history, community, and attractions.
As a gentrifying middle-ring suburb, Preston is a particularly great location to buy a townhouse.
10. Reservoir
Total population: 53,046
Average age: 30-34
Median house price: $850,000
Median unit price: $500,000
Reservoir is another gentrifying middle-ring suburb which offers great opportunities to buyers looking for a townhouse.
Not only is it one of Melbourne's most affordable suburbs, but it has good access to schools, transport, parks, gardens and business hubs, making it a popular choice for a variety of household types.
11. Ringwood
Total population: 19,144
Average age: 38
Median house price: $960,000
Median unit price: 530,000
Like Mitcham, Ringwood is another suburb located in the middle ring of eastern suburbs in Melbourne, where gentrification and infrastructure upgrades are plentiful but property prices are still affordable.
The combination means the suburb is experiencing strong owner-occupier demand which will only continue to push up property prices and rental demand in the area.
So, what are Melbourne’s best suburbs for property investment now?
Let me make one thing clear first…
There might be a lot of talk about certain property ‘hotspots’ which are said to guarantee investment return.
But I don’t believe in hotspots or investing in an area just because it is expected to be the “next best thing”.
As far as I’m concerned, this year’s “hotspots” tend to be next year’s “not-spots” and as a long-term investor, I base my decisions on fundamentals.
I do not gamble.
My approach to this list of top Melbourne suburbs for 2024 is to highlight strong and stable suburbs that have shown both consistent historical growth and also have the right demographics to suggest future long-term growth.
And let’s not forget one of the most vital things to remember…
Note: Neighbourhood is now more important than ever!
In the post-COVID world, the ability to work, live, and play all within 20-minutes-reach home is the new gold standard desirable lifestyle.
If social distancing and the pandemic taught us anything, it’s the importance of the neighbourhood we live in.
If you can leave your home and be within walking distance of, or a short trip to, a great shopping strip, your favourite coffee shop, amenities, the beach, or a great park, the recently implemented coronavirus restrictions might seem a little more palatable than if you had none of that on your doorstep.
But the reality is, this concept is nothing new.
In fact, the rise of the 20-minute neighbourhood started long before Covid-19.
You will find these are often in the gentrifying aspirational lifestyle suburbs of our capital cities and people will pay a premium to either own or rent a property in these locations.
And many of Melbourne’s inner suburbs and middle ring suburbs already meet the 20-minute neighbourhood test thanks to ample supermarkets, the tram line, bus stops, numerous coffee shops, and other things which make the area considerably more appealing.
Unlike the outer suburbs which are set away from city transport links and with minimal access to supermarkets, coffee shops, or clothes shops… there definitely aren’t any gastro breweries or art galleries.
As the size of our accommodation gets smaller, demand for options in a great neighbourhood will rise and people will be prepared to pay a premium to live or rent in this type of location.
Understanding these factors forms part of the research data we use at Metropole to help our clients find investment-grade properties or A-grade homes for owner occupation.
As has happened in the past, moving forward the various suburbs in our cities will show a dramatic range in performance, and in my mind, there's no doubt that proximity to lifestyle locations will remain a big drawcard.
As well as access to popular education catchments.
This is true of both primary and secondary school catchment zones, which have in general outperformed the market and are likely to continue to do so.
Education is a long-term consideration and, whether you are planning a family, have children already enrolled in school, or are an investor looking to attract long-term, quality tenants, it may be beneficial to consider school catchment zones when you are determining suburbs of interest.
Tips: Follow the demographics!
According to leading demographer Bernard Salt, the pandemic changed the Australian workforce not just by prompting adaptation to new technology like Zoom calls and triggering a work-from-home movement, but also by rigidly dividing the nation according to skill sets.
- Also read:The 8 Best Property Investment Strategies in Australia
- Also read:Adelaide housing market update [video] | December 2024
- Also read:Perth housing market update [video] | December 2024
- Also read:Sydney housing market update [video] | December 2024
- Also read:Latest property price forecasts for 2025 revealed. What’s ahead in our housing markets in the next year or two?
The Australian Bureau of Statistics classifies every job according to one of five skill levels with Skill Level 1 being the most skilled.
It is well recognised that the rich – such as people with a Skill Level 1 job - are getting richer, and at the other end of the spectrum, Skill Level 5 jobs, which require little or no previous work experience (like general sales assistant, kitchen hand) are experiencing no wages growth.
A Skill Level 1 job requires a bachelor’s degree or higher, or the equivalent of at least 5 years of training.
People with these types of jobs will earn more income and be able to afford to pay more for their properties.
The pandemic demands skills in finance (accounting), risk management (solicitors), computer programming, and many other Skill Level 1 jobs.
However, the story of the balance of the workforce has been quite different.
So understanding where the Skill Level 1 worker lives in Melbourne is critical and can be seen in the following graphic provided by Bernard Salt for The Australian.
