Melbourne has always been a city of cycles. Booms, downturns, and recoveries are part of its property story — and in 2025, that story is entering a new chapter. After a year of sluggish growth in 2024, Melbourne has now recorded four consecutive months of price growth, signalling that the market has turned a corner.
For investors, this moment is particularly exciting. Prices remain below their 2022 peaks, vacancy rates are at historic lows, and the city’s population is surging faster than anywhere else in Australia. On top of that, forecasts from Domain and KPMG suggest Melbourne will lead the nation in growth in 2025–26.
But here’s the catch: not every suburb will deliver the same returns. Picking the right location is what separates an average investor from a strategic one. This guide unpacks the outlook for Melbourne’s property market, highlights the suburbs best positioned for growth, and explains which areas to approach with caution.
Melbourne’s Market in 2025: Why the Tide is Turning
Four months of growth and counting.
After sliding through much of 2024, Melbourne property prices are back on the rise. Cotality (formerly CoreLogic) data shows four straight months of home price increases in early 2025, buoyed by renewed buyer confidence.
Forecasts for 2025–26
Two of the most respected property outlooks paint a strong picture for Melbourne:
- Domain expects Melbourne house prices to grow by 6% in FY26, reaching a median of $1.11 million, while units are forecast to lift 5% to $584,400.
- KPMG predicts Melbourne will be the standout performer nationally, with house prices climbing 6.6% in 2026 (adding nearly $65,000 to the median) and units up 7.1%, outpacing all capitals except Darwin.
- CBRE projects Melbourne apartment rents will surge 24% by 2030, driven by undersupply and strong demand.
House Price Growth Forecasts (Domain vs KPMG)
Comparison of Domain vs KPMG house price forecasts across capital cities for FY26
House Price Growth Forecasts (Domain vs KPMG)
Why Melbourne Still Stands Out for Investors
- Population Growth: Victoria grew by 146,000 people in the year to September 2024 — the largest increase of any state. By 2051, Melbourne’s population is projected to hit 9 million, overtaking Sydney.
- Tight Supply: Building approvals are at record lows, new housing starts are declining, and completions in 2025 will be the lowest in a decade. This imbalance will push both prices and rents higher.
- Rental Market Pressure: Vacancy rates sit around 1.5%, well below the balanced market threshold of 2–2.5%. As supply falls and population rises, rents are expected to keep climbing.
- Long-Term Resilience: Despite recent underperformance, Melbourne has historically been one of Australia’s strongest-performing markets over the past four decades. Investors who buy countercyclically now may enjoy outsized returns as the cycle strengthens again.
The Best Suburbs to Invest in Melbourne in 2025
Melbourne Investment Suburb Profiles
| Suburb | Region | Median House Price | 12-Month Growth |
|---|---|---|---|
| Toorak | Inner East | $4,385,822 | $237,486 |
| Canterbury | Inner East | $3,281,919 | $160,638 |
| Balwyn | Inner East | $2,859,099 | $156,400 |
| Surrey Hills | Inner East | $2,289,021 | $125,312 |
| Mount Waverley | East | $1,630,000 | $85,000 |
| Glen Waverley | East | $1,750,000 | $92,000 |
1. Inner-East Prestige: Blue-Chip Security
Melbourne’s eastern blue-chip suburbs remain the gold standard for long-term growth. Scarcity of supply, prestige appeal, and strong demand from high-income households make these areas consistently resilient.
- Toorak: Median house values rose by $237,000 in 2024.
- Canterbury & Balwyn: Recorded six-figure annual gains, supported by elite schools and period homes.
- Surrey Hills & Mont Albert: Leafy suburbs with excellent connectivity to the CBD.
2. Middle-Ring Family Hubs: Gentrification in Action
Families are increasingly drawn to middle-ring suburbs with good schools, transport, and lifestyle facilities.
- Mount Waverley & Glen Waverley: Eastern powerhouses with ongoing infrastructure upgrades.
- Essendon & Moonee Ponds: Western options with strong appeal to families and professionals.
- Ringwood & Blackburn: Affordable yet well-connected suburbs undergoing gentrification.
3. Bayside Lifestyle Suburbs: Coastal Appeal Meets Gentrification
Melbourne’s south-east and bayside pockets remain enduring favourites, combining lifestyle with accessibility.
- Bentleigh & McKinnon: Strong school catchments and family appeal.
- Cheltenham, Mentone & Parkdale: Bayside suburbs with excellent transport links and lifestyle credentials.
4. Northern Transformation: Affordable Growth Corridors
Northern Melbourne is undergoing transformation, with younger demographics and infrastructure investment fuelling growth.
- Reservoir & Preston: Standouts for townhouse and villa unit investments, popular among professionals and families.
5. Boutique Apartments and Villa Units: Value in Scarcity
While high-rise towers in Docklands and Southbank should be avoided, established boutique apartments in premium suburbs are showing renewed strength.
- South Yarra & Carlton: Character-filled low-rise apartments appeal to students, professionals, and downsizers.
- Fitzroy & Collingwood: Trendy inner-north hubs where boutique apartments offer strong rental demand.
Suburb-by-Suburb Investment Profiles
To help guide your decision-making, here’s a breakdown of median prices, recent growth, and rental yields across key investment suburbs:
Melbourne Investment Suburb Profiles
Melbourne Investment Suburb Profiles
| Suburb | Region | Median House Price ($) | 12-Month Growth ($) | Rental Yield (%) |
|---|---|---|---|---|
| Toorak | Inner East | 4,385,822 | 237,486 | 2.2 |
| Canterbury | Inner East | 3,281,919 | 160,638 | 2.4 |
| Balwyn | Inner East | 2,859,099 | 156,400 | 2.5 |
| Surrey Hills | Inner East | 2,289,021 | 125,312 | 2.6 |
| Mount Waverley | East | 1,630,000 | 85,000 | 3.0 |
| Glen Waverley | East | 1,750,000 | 92,000 | 3.1 |
| Essendon | West | 1,500,000 | 78,000 | 3.2 |
| Moonee Ponds | West | 1,420,000 | 76,000 | 3.3 |
| Bentleigh | South-East | 1,400,000 | 70,000 | 3.0 |
| Cheltenham | South-East | 1,250,000 | 68,000 | 3.2 |
| Mentone | South-East | 1,300,000 | 72,000 | 3.1 |
| Parkdale | South-East | 1,350,000 | 74,000 | 3.0 |
| Reservoir | North | 900,000 | 50,000 | 3.8 |
| Preston | North | 950,000 | 52,000 | 3.7 |
| South Yarra | Inner | 2,027,363 | 136,311 | 4.0 |
| Carlton | Inner | 1,100,000 | 60,000 | 4.2 |
Where to Avoid
Not every investment makes sense in 2025.
- Outer Growth Suburbs: Melton, Bacchus Marsh, Werribee South. Affordable but lacking infrastructure.
- Regional Victoria: Population growth lags behind Melbourne’s capital-city fundamentals.
- High-Crime Areas: Broadmeadows, Campbellfield, and parts of Dandenong deter tenants and buyers.
- High-Rise Apartments: Oversupply and weak rental demand in CBD towers continue to underperform.
Risks and Challenges for Investors
Taxes and Regulation
Victoria has introduced multiple taxes hitting investors, from land tax changes to the windfall gains tax on rezoned land. Coupled with tenancy reforms that favour renters, holding costs are rising.
Economic Uncertainty
Victoria’s economy has faced setbacks, with a net reduction of over 7,600 businesses in 2022–23 and heavier tax burdens on employers. While transitory, these factors can weigh on short-term confidence.
The Long-Term Opportunity
Despite these challenges, Melbourne’s fundamentals remain robust:
- Population growth is the strongest in the country.
- Housing undersupply will drive rents and prices higher.
- Affordability gap with Sydney offers significant upside potential.
Investors who bought into Brisbane and Perth during their down cycles three years ago are now reaping strong gains. Melbourne appears to be at the same turning point.
Final Word: Where to Put Your Money in 2025
If you’re considering Melbourne property investment in 2025, focus on:
- Blue-chip inner-east suburbs for long-term stability and prestige.
- Middle-ring family hubs for owner-occupier demand.
- Bayside lifestyle pockets for lifestyle-driven growth.
- Gentrifying northern suburbs for affordable entry points.
- Boutique apartments and villa units in premium suburbs for rental resilience.
Avoid oversupplied towers, speculative fringe suburbs, and weak-demand areas.
The Melbourne property cycle is shifting, and those who act strategically now are likely to benefit as momentum builds. History shows Melbourne rewards patience, and 2025 may be the perfect moment to enter before the crowd returns.
Dylan Bertovic is the Director and Senior Finance Broker at Stryve Finance, specialising in non-traditional lending solutions. He helps clients across Australia with tiny home loans, construction finance, equipment and asset lending, refinancing, and investor loans. With deep expertise in self-employed and renovation mortgages, Dylan is known for crafting tailored strategies that get results
