Choosing Melbourne’s Best Suburbs for Property Investment

Much like Melbourne’s unpredictable weather, the property market has been going through a cold spell—some might even say it’s experiencing all four seasons in a day.

Several factors have knocked Melbourne off its pedestal, including rising interest rates, soaring living costs, an oversupply of poorly built apartments, and new land taxes dampening investor confidence.

While many of these factors still persist, Melbourne remains the best value among Australia’s major cities, with a median property price of $895,000 in early 2025. Finding an affordable capital city with a history of strong growth potential is becoming increasingly rare.

Melbourne’s Hotspots: Where Has Capital Growth Thrived?

When it comes to property demand, Melbourne has its fair share of standout suburbs. Traditionally, certain areas have consistently outperformed the market, driven by lifestyle appeal, strong infrastructure, and limited supply. But which locations have seen the highest demand over the years? Let’s take a closer look.

The best way to remember the hot suburbs in Melbourne is to compare it to real estate prices on a Monopoly board.

At the start of the game (Melbourne’s Western Suburbs) property is most affordable, then as you work your way around the board things start to get more expensive. Towards the end of the board they have some really pricey real estate that pays big rents. This represents the East and South-Eastern suburbs of Melbourne.

We keep a close eye on Melbourne’s fastest-growing suburbs, and time after time, the same locations continue to dominate the rankings. 

This is evident when examining a map of Melbourne; you’ll observe that the Eastern suburbs extend roughly 60km from the CBD, whereas the West spans approximately 35km.

Melbourne’s Top Performing Suburbs: Finding the Best Fit for Your Budget

Up to $1M 

Western Suburbs:
Yarraville, Altona & Footscray.

Northern Suburbs:
Preston, Brunswick & Fitzroy North.

Eastern Suburbs.

Glen Huntly & Murrumbeena.

South Eastern Suburbs

Mordialloc, Aspendale & Edithvale.

$1M to $2M+ Budget

Western Suburbs
Yarraville, Williamstown & Newport.

Northern Suburbs
Ascot Vale, Essendon & Flemington.

North Eastern
Balywn, Doncaster & Kew.

Eastern
Hawthorn, Malvern East & Armadale.

South Eastern.
Brighton, Elwood & Prahran.

Maximizing Capital Growth: Which Property Type Wins in Melbourne?

When it comes to long-term wealth building, not all properties perform equally. Some deliver steady appreciation, while others struggle to keep up. So, which type of property offers the best capital growth in Melbourne? Let’s break it down.

Buying a house offers long-term flexibility—you can renovate, knock it down, or even build multiple dwellings.

Land is also a key driver of capital growth. While a property’s fixtures and fittings depreciate over time, the land itself retains and often increases in value, making it a smart long-term investment.

Units typically come with lower running costs, minimal maintenance, and strong rental demand. While renovations are possible, adding significant value can be challenging.

Since units offer less land, it’s crucial not to overpay for high-end fixtures and fittings that depreciate quickly. With smaller land allotments, location matters—buying as close to the city as possible can maximize growth potential.

Ultimately, the choice between a house and a unit depends on your investment strategy and long-term goals.

Apartments can be a risky investment and should be approached with caution. Many in Melbourne have seen little to no capital growth over the past decade, often weighed down by high ongoing fees and questionable build quality. For most investors, apartments aren’t the ideal choice for long-term wealth creation.

What Do Melbourne’s Most In-Demand Suburbs Have in Common?

The suburbs with the highest demand share several key traits:

• Established, Not Emerging – None are in Melbourne’s developing areas, which often lack infrastructure, schools, and lifestyle amenities. As the city’s population grows, outer suburbs are becoming notorious for traffic congestion. Developing areas like Pakenham (east), Craigieburn (north), and Wyndham Vale (west) are still catching up.

   

• Zoned Schools – High-demand suburbs have sought-after public and private schools that only accept local students. To check if your preferred suburb falls within a school zone, visit Find My School, the official Victorian government tool. Some premium school zones can significantly drive up property values—read our article on why school zones impact real estate prices.

   

• Strong Infrastructure – Proximity to trams, trains, or major highways is a must. Well-connected suburbs make commuting easier and add long-term property value.

   

• Cafés & Dining Culture – Melbourne is world-famous for its café scene, and the most desirable suburbs embrace this culture with vibrant dining and social spots.

   

• Natural Amenities & Lifestyle Appeal – Premium real estate in Melbourne is often near Port Phillip Bay or the Yarra River. Waterfront locations consistently hold the city’s highest property values, offering residents a desirable lifestyle and strong capital growth potential.