It’s fair to say Australia saw a two-speed property market in 2024, with Melbourne being one of the capital cities losing ground.
The latest CoreLogic figures (as at December 2024) show Melbourne dwelling values fell 2.3% over the past 12 months.
In January 2024, Brisbane overtook Melbourne as the second most-expensive capital city for dwelling values (behind Sydney) and in May, Brisbane’s median house price followed suit.
Australian property identity John McGrath said Melbourne’s softer market may in part be attributed to the Victorian government’s decision to lower the land tax-free threshold for investors in January 2024.
It saw many investors leave the market and Melbourne remains “at the bottom of the pack for investor activity”, according to Mr McGrath.
It also created a surge in new property listings during the year compared to other capital cities, while regional Victoria saw an even larger influx.
This was good news for owner occupiers looking to buy, but it also saw rental properties leave the market.
Mr McGrath said this reduction in supply is likely to have contributed to the city’s significant rent increases, alongside Melbourne’s national-high migration intake.
Affordability improving
A positive for the market was a boosted entry of first home buyers and better home affordability opportunities.
However, SQM Research isn't expecting Melbourne’s housing market to bounce back any time soon, as noted in its Boom and Bust Report.
The housing data analytics company sees Melbourne home values falling another 1-5% over the coming year, with most of the weakness expected in the inner-city ring where SQM is seeing a surge in distressed listings.
SQM Research managing director Louis Christopher said if the Reserve Bank cuts interest rates mid-year by 25 to 50 basis points, as he currently anticipates, buyer demand may be stimulated, helping to stabilise price falls in Melbourne.
That said, the Melbourne market may be presenting good long-term opportunities for buyers.
Here’s the pick of the city’s suburbs, according to the experts on the ground.
Median price and rent data from realestate.com.au, as at December 2024
Pascoe Vale, 3044
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Median price: $1,017,500 for houses, $630,000 for units
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Median rent: $600 pw for houses, $520 pw for units
The suburb nine kilometres north of Melbourne’s CBD is the first pick of Emily Wallace, founder of Melbourne boutique buyers' agency Wallace Advocates.
“Its proximity to the city is within commuting distance but there are a lot of properties that are available for first home and family home buyers in that pocket that would be considered affordable in comparison to other suburbs that are the same distance to the CBD,” Ms Wallace told Savings.com.au.
Pascoe Vale is known for its many parks and gardens yet offers a 20-minute train commute to the city and ready access to the Tullamarine Freeway. It’s described as a “quiet suburb”, good for families, with many school options.
Ms Wallace said buyers are starting to cotton on to the suburb’s appeal, but she believed Pascoe Vale hasn’t hit its peak in popularity yet.
“It's certainly been one that people are considering when they've been priced out of the inner-northwest area and are looking a bit further afield,” she said.
Keilor East, 3033
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Median price: $1,015,000 for houses, $747,500 for units
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Median rent: $600 pw for houses, $550 pw for units
Keilor East, situated 13 kilometres north-west of Melbourne’s CBD, is Mr McGrath’s top Melbourne pick.
He cites the upcoming addition of a new train station as part of the Melbourne Airport Link as a boon to the suburb, although that could be some years away given delays to the construction project.
He also likes that Keilor East sits within the multi-campus Essendon Keilor College school zone.
“It is a stone’s throw from the M80 ring road, Highpoint Shopping Centre and vibrant Buckley Street in Essendon,” Mr McGrath said.
“Keilor East has all the charm and lifestyle of Essendon but with a much lower price tag.”
Indeed, Keilor East’s median house price is just over the $1 million mark compared with Essendon’s $1.8 million.
Deer Park, 3023
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Median price: $651,500 for houses, $506,500 for units
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Median rent: $470 pw for houses, $430 pw for units
The middle-ring suburb, 17 kilometres west of the Melbourne CBD, is a top pick of National Property Buyers' (Victoria) director Antony Bucello.
“For buyers with budgets between $600,000 to $800,000, there is a strong selection of suburbs in Melbourne’s northern and western middle-ring areas,” Mr Bucello told Savings.com.au.
“These locations offer promising potential for long-term growth, supported by healthy rental yields, provided you get the property purchase right.”
Mr Bucello said Deer Park is an attractive option for both home buyers and investors, especially those priced out of the more expensive inner-western suburbs such as Footscray or Yarraville.
“Deer Park provides excellent transport options via road or public transport, and you can access the city, the airport, and even the beach without too much effort,” he said.
The suburb is a 30-minute drive to the city or an hour to Victoria’s third largest city Ballarat via Ballarat Road, which connects to the M8. The airport is about 17 minutes by car, making it convenient for frequent travellers or airport employees.
As well as accommodating three primary schools and a secondary college, Deer Park is an easy commute to Victoria University’s St Albans and Footscray campuses.
“With a budget between $500,000 to $600,000, we would be chasing townhouses or villa units with two-plus bedrooms and one-plus car park south of Ballarat Road and near the train station,” Mr Bucello said.
He said such properties would give a potential rental yield of 4.5%.
Cheltenham, 3192
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Median price: $1,210,500 for houses, $640,000 for units
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Media rent: $700 pw for houses, $520 pw for units
Ms Wallace also nominates the bayside suburb of Cheltenham, 18 kilometres south-east of the CBD and featuring the major Westfield Southland shopping centre.
“I would say that Cheltenham is still really underrated,” Ms Wallace said. “It’s on a train line, has a Westfield, and an array of schools to choose from.”
Ms Wallace said Cheltenham features one of the best schools per capita numbers in the city, offering families a wide selection of education options.
The suburb is also known for its proliferation of premium golf courses and has also been undergoing gentrification in recent years with the addition of signature inner-Melbourne-style cafes and brew houses.
Reservoir, 3073
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Median price: $895,000 for houses, $620,000 for units
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Median rent: $550 pw for houses, $492 pw for units
Reservoir, approximately 11 kilometres north of the CBD, is one of Melbourne’s largest suburbs by geographical area and, as such, property prices can vary significantly.
It is an established suburb with a mix of older homes on large blocks and new boutique developments. According to Mr Bucello, Reservoir “feels more spacious” than its more expensive neighbours such as Coburg and Preston.
Because of the suburb’s size, it is serviced by three train stations and also has shopping plazas, shopping strips, a leisure centre, parks, and a good selection of schools.
“Reservoir is definitely benefiting from gentrification but there are pockets that are better than others,” Mr Bucello said.
He advises property hunters to look around Reservoir train station - the suburb has significant industrial areas in the west but a commercial focus around the railway station.
“Oakhill Estate holds most of Reservoir’s prestigious streets but there are some great alternatives in many other parts,” he said.
For a budget of around $700,000, he recommends a townhouse or villa on a smaller parcel of land, preferably with a courtyard and one or more car parking spots, close to amenities and transport.
“If you have a bit more in the tank, there are older homes on larger blocks of around 700 square metres-plus,” he said.
St Kilda East, 3183
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Median price: $1,695,500 for houses, $567,500 for units
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Median rent: $875 pw for houses, $520 pw for units
Situated inland from the neighbouring and more famous beachside suburb of St Kilda, St Kilda East is another pick of Mr Grath’s.
He describes the “little hamlet” as having parks, transport, and good schools on its doorstep with a more “suburban feel” than its bustling neighbour.
“[It has] leafy streets and art deco style homes and apartment blocks, but it’s just a short tram ride into the heart of St Kilda,” Mr Grath said.
St Kilda East is home to a diverse mix of residents, including Melbourne’s Hasidic Jewish community and a strong arts and indie community around the vibrant Carlisle Street.
That area has been designated an 'activity centre' under the Victorian government’s Melbourne’s 2030 strategic planning framework designed to cater for the city’s ever-growing population.
St Kilda East is already seeing modern infill medium-density apartments on larger blocks although the suburb remains dominated by 1960s flats that may offer better affordability.
“St Kilda East is ideal for investors, downsizers, and first home buyers alike,” Mr McGrath said.
Sunshine West, 3020
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Median price: $675,5000 for houses, $605,500 for units
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Median rent: $480 pw for houses, $450 pw for units
Mr Bucello admits the suburb’s reputation isn’t always glowing, but he believes Sunshine West offers real opportunity with the suburb expected to become more popular in the coming years.
At 13 kilometres west of Melbourne and with an affordable median house price, Sunshine West is expected to perform off the back of neighbouring Sunshine and the amenities it has to offer.
Sunshine train station has been earmarked for significant upgrades and Mr Bucello believes a pipeline of major rail investments for the city’s west - including the Metro Tunnel, Melbourne Airport Rail, and the Western Rail Plan - will all contribute to Sunshine station’s transformation into a “transport superhub”.
But he concedes Sunshine West is a suburb in which you need to know your pockets.
“Avoid the southern end as it is largely industrial [and] avoid being too close to the freeway [M80] and the transmission lines,” he advised.
He would concentrate property searches near Sunshine, particularly Sunshine Station or Ardeer Station.
A three-plus bedroom, two-plus bathroom house on over 600 square metres with potential to subdivide would “be a good option”, he said.
Mill Park, 3082
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Median price: $780,000 for houses, $523,750 for units
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Median rent: $510 pw for houses, $450 pw for units
Mr Bucello’s final pick is Mill Park, 18 kilometres north-east of Melbourne’s CBD, which he believes represents a good opportunity for buyers interested in capital growth.
Mill Park’s median house price is less than half of its aptly-named neighbouring suburb Plenty, which comes with a median price tag of close to $1.8 million.
“The residents of Mill Park rave that it’s a great suburb to raise children and build a sense of community,” Mr Bucello said. “It has everything you need close at hand and in a leafy green setting.”
He lists the train station, Westfield Shopping Centre, The Stables Shopping Centre, RMIT University’s Bundoora campus as well as the recently upgraded Mill Park Leisure Gym and Mill Park Library.
“Plenty Road runs through the suburb and can take you straight into the city by tram,” Mr Bucello said. “It also connects you to the Western Ring Road which is a freeway that connects the northwest suburbs to each other without the need to travel to the CBD.”
He said Mill Park offers the opportunity to buy a four-bedroom, two-bathroom home under 20 kilometres from the CBD for under $850,000 with plenty of three-bedroom opportunities for buyers with smaller budgets.
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