Melbourne’s property market sentiment is showing signs of recovery. Auction clearance rates are on the rise, and property investors are increasingly focused on identifying property hotspots—and avoiding potential underperformers.
In recent weeks, Melbourne has recorded the highest auction activity nationally, with over 1,500 homes going under the hammer. Despite only a modest 1.6% increase in Melbourne’s median house price in the 12 months to June, several suburbs have outperformed significantly.
Strong Performing Suburbs Identified in Latest Data
According to the latest Domain House Price Report, seven Melbourne suburbs posted double-digit growth over the same 12-month period, well above the citywide average.
What’s driving this divergence? The key appears to be infrastructure investment and transport connectivity, factors that are proving crucial for property performance in Melbourne.
Infrastructure and Population Growth Fueling Demand
Seth Winkles, Managing Partner at Investdoor, attributes the improved market performance to two primary factors: population growth and infrastructure development.
“The major factor is the population growth. According to the ABS, Victoria’s population increased by approximately 2.1–2.4% as of March 2024—the fastest of any state or territory,”
— Seth Winkles, Investdoor
This growth, driven by returning international students, skilled migrants, and interstate relocations, is putting upward pressure on both rental and purchase demand.
In parallel, more than $10 billion in infrastructure projects is being invested through the 2024–2025 Victorian state budget. Major developments include:
- Suburban Rail Loop East
- Arden Medical Precinct
- Melbourne Metro Stage 2
These projects are transforming middle-ring suburbs, increasing their liveability and investor appeal.
Emerging Property Hotspots
Winkles points to Box Hill as a key example. The suburb recently recorded an 82% auction clearance rate and a 4.6% increase in median unit prices year-on-year.
“This level of performance indicates strong purchasing activity and long-term confidence in places where improved connectivity and services are being delivered,”
— Seth Winkles
Other property hotspots identified by Winkles include:
- Preston – Set to follow in Northcote’s footsteps, benefiting from urban renewal and strong demand from younger buyers.
- Sunshine – Rezoned from industrial to residential, it is poised to become a major employment and transport hub due to the Suburban Rail Link and Airport Rail Project.
- Geelong West
- Melton South
Meanwhile, Laura Scott from aussieproperty.com highlighted Frankston as another suburb offering long-term investment potential.
“Frankston is a rapidly emerging bayside growth hub. It offers gentrification appeal, beachside living, a median house price of $750,000, and the upcoming Suburban Rail Loop station,”
— Laura Scott, aussieproperty.com
Suburbs to Approach with Caution
While some areas are rising stars, others show signs of oversupply and underperformance.
Scott identified Docklands and Southbank as locations where high apartment density, low yields, and elevated maintenance costs continue to dampen investor returns.
“There are issues with oversupply, high maintenance costs and low rental yields that have been persistent since the pandemic,”
— Laura Scott
Winkles also flagged caution in outer growth areas such as:
- Donnybrook – Oversupplied with land and amenities lagging behind development.
- Rockbank – Feels isolated due to minimal local infrastructure.
- Truganina – Struggling with oversupply, poor walkability, and limited signs of gentrification.
