Best suburbs to invest in Melbourne 2024

Thinking of buying property in Melbourne in 2024?

Despite multiple interest rate rises and cost of living pressures, the Melbourne housing market recovered from its January 2023 trough and prices are on the way up. It’s looking bright now, but how will the market respond to these challenges in 2024?

Let’s look at how the market performed in 2023 before considering some expert predictions for Melbourne housing prices over the next twelve months.

What did the Melbourne property market look like in 2023?

The latest CoreLogic figures reveal Melbourne dwelling values are gaining +2.4 per cent annually, marking a slow but steady recovery since falling -9.3 per cent in January 2023.

CoreLogic tracks Melbourne housing values rising +4.5 per cent over January - October. Despite Brisbane (+10. 5 per cent), Perth (+11 per cent) and Adelaide (+7.7 per cent) achieving record highs since their troughs, Melbourne remains one of Australia’s most expensive capital city markets, with a median dwelling value of $778,541. Only Sydney (median dwelling value $1,121,196) and Canberra (median dwelling value $842,722) rank higher.

The upswing in Melbourne property prices was shadowed by mounting pressures on the national housing market. The RBA announced five interest rate rises, taking the cash rate to 4.35 per cent in November. Renewed inflation and cost of living pressures dampened homebuyer sentiment which fell -0.6 per cent over the three months to October.  

While capital city house sales tracked just above the five-year average, buyer interest shifted from higher to mid-range properties in the more expensive markets. Like in Sydney, upper end properties led the recovery but, as prices climbed, the broad middle of the Melbourne housing market is now recording the highest growth rate.

“Possibly we are starting to see renewed affordability challenges deflecting more demand towards the middle of the market where barriers to entry are lower,” says CoreLogic research director Tim Lawless.

Along with affordability constraints, the spring selling season saw an above average number of property listings. NAB reports advertised homes for sale in Melbourne have “tracked above the five-year average since early August.” While the volume of sales rose +1.7 per cent, new listings are now +12 per cent higher than in 2022.

Rather than driving up sales, Tim warns oversupply could slow growth. “With an acceleration in the flow of new listings coming onto the market, it’s unlikely buyer demand will be able to keep pace … amid high interest rates and low sentiment,” says Tim. 

For now, PropTrack Senior Economist Eleanor Creagh expects home prices to keep rising. “Strong home buying demand has absorbed the uplift in new stock for sale and seen prices continue to lift,” says Eleanor. “The price recovery in Melbourne is still lagging Sydney and Brisbane, but remains ahead of … Hobart and Canberra.”

As the recovery continues, increased migration could fuel growth. Pandemic-related restrictions saw Melbourne’s population growth fall to -1.6 per cent by 2020/2, but this has reversed, with Melbourne projected to overtake Sydney as Australia’s largest city in 2031-32.    

“Together with a shortage of new home builds and continued challenging conditions in the rental market, prices are expected to continue to rise despite affordability remaining stretched,” says Eleanor.   

Best suburbs to invest in Melbourne in 2024

CoreLogic reveals these Melbourne LGAs had the highest 12-month price increases in 2023:

• Monash, +8.5 per cent
• Manningham – West, +8.1 per cent
• Whitehorse – West, +7.0 per cent
• Whitehorse – East, +6.9 per cent
• Banyule, +6.1 percent

Trent Alexander’s top 5 suburbs emphasise proximity to good schools, transport and amenities:

• Caulfield
• Elsternwick
• Ormond
• Bentliegh and Bentleigh East
• McKinnon

 Similarly, John McGrath’s picks are well-connected, vibrant suburbs, packed with lifestyle and housing options:

• Flemington
• Point Cook
• Spotswood

Australian Property Investor identifies these suburbs as hotspots for Melbourne house investment:

• Yallambie
• Croydon South
• Heathmont

Melbourne property market forecast 2024

While Melbourne house prices are not performing as strongly as some other capitals, experts predict housing prices in Melbourne could see modest gains before the end of 2024.

CoreLogic data for June 2024 shows Melbourne dwelling values gained +1.3 per cent over the past year, lagging Perth (+23.6 per cent), Brisbane (+15.8 per cent), Adelaide (+15.4 per cent) and Sydney (+6.3 per cent). House prices in Melbourne crept up +1.2 per cent, taking the median house price to $948,879.

Some areas fared better than others, with property prices in Moreland – North (+4.71 per cent), Kingston (+4.47 per cent), Darebin – North (+4.44 per cent) and Casey – South (+4.01 per cent) seeing the most growth according to CoreLogic.  

Despite an overall sluggish start to the year, experts believe strong population growth and tight supply could put upward pressure on Melbourne property prices into the second half of 2024.

Accounting firm KPMG predicts Melbourne house prices will have risen +2.8 per cent by the end of 2024 and +6.5 per cent by the end of 2025, while NAB forecasts Melbourne housing prices to rise +2.5 per cent in 2024 and +3.7 per cent in 2025.  
At the lower end, Domain expects Melbourne house prices to change by 0 to +2 per cent and unit prices by +2 to +4.0 per cent over the next year. Similarly, CommBank forecasts Melbourne home prices flattening to 0 per cent growth by the end of 2024, but with land tax changes and increased investor interest perhaps turning the tide, gains of +4 per cent are expected in 2025.

Although trailing some of the other capitals, property expert Michael Yardney says the slow pace of the Melbourne property market is a “window of opportunity” for strategic property investment.

“The average price of a Melbourne standalone house is the lowest it has been against its Sydney equivalent in around twenty years,” Michael says. “There is significant ‘inbuilt equity’ in the undervalued Melbourne housing market at present.”

A tightening rental market also puts houses in a strong position for property investment in Melbourne. SQM records Melbourne house rents as increasing +10.6 per cent over the past year, averaging $746.04 per week.

What's the Melbourne apartment market like?

Melbourne unit prices grew +2.8 per cent in 2023, with CoreLogic recording a median unit value of $615,022.

KPMG expects Melbourne unit prices to grow +6.2 per cent by December 2024 and +7 per cent by June 2025.   

John McGrath says returning international students and professional workers placed immense pressure on Melbourne’s rental market as vacancy rates hit a record low 0.8 per cent in 2023. “This trend has been particularly pronounced in inner city apartment markets and marks a stark contrast from the peak of the pandemic when Melbourne’s inner city vacancy rates increased dramatically,” John says.

Over 2024-28, commercial real estate firm CBRE expects apartment delivery will average 10,000pa while demand will average 38,000pa. Melbourne apartment vacancy rates are predicted to drop to 0.9 per cent and median rent increase. CBRE names Melbourne North as a potential high performer, predicting +30 per cent rent growth over the next five years.

“Melbourne apartment rents have soared +23.1 per cent in the past year,” says Michael Yardney. “Family friendly apartments in low-rise developments located in lifestyle suburbs … make great investments.

Frequently asked questions about best suburbs to invest in Melbourne