Authored by the expert who managed and guided the team behind the Australia Property Pack
Yes, the analysis of Melbourne's property market is included in our pack
If you're a foreign buyer eyeing Melbourne property in January 2026, there's one big thing you need to know right away: you're restricted to buying new dwellings or off-the-plan properties until at least March 2027.
This guide breaks down which Melbourne neighborhoods offer the best rental yields, where short-term rentals still make sense, and which areas are genuinely up-and-coming versus overhyped.
We constantly update this blog post to reflect the latest market shifts, infrastructure developments, and regulatory changes.
And if you're planning to buy a property in this place, you may want to download our pack covering the real estate market in Melbourne.
What's the Current Real Estate Market Situation by Area in Melbourne?
Which areas in Melbourne have the highest property prices per square meter in 2026?
As of early 2026, the three Melbourne neighborhoods with the highest estimated property prices per square meter are Toorak, South Yarra, and Brighton, where premium homes and apartments command extreme premiums due to scarcity and prestige.
In these most expensive Melbourne areas, typical prices range from approximately AUD 15,000 to over AUD 25,000 per square meter for quality apartments and townhouses, with ultra-premium houses pushing even higher.
Each of these top-tier Melbourne neighborhoods commands high prices for distinct reasons:
- Toorak (3142): Elite school zone, ultra-low housing supply, and Melbourne's strongest prestige premium.
- South Yarra (3141): Chapel Street lifestyle corridor, deep apartment market, and excellent public transport.
- Brighton (3186): Bayside scarcity with beach access, family-friendly reputation, and heritage streetscapes.
For foreign buyers in Melbourne in January 2026, it's important to note that most properties in these premium suburbs are established houses, which you cannot purchase until at least March 2027 unless you qualify for a specific exemption under the ATO foreign investment rules.
Which areas in Melbourne have the most affordable property prices in 2026?
As of early 2026, the most affordable Melbourne areas for property buyers include Melton (3337), Werribee (3030), Craigieburn (3064), and Cranbourne (3977), which are all outer-suburban growth corridors with significant new housing supply.
In these budget-friendly Melbourne suburbs, typical prices range from approximately AUD 4,000 to AUD 7,000 per square meter for new houses and townhouses, making them accessible entry points for investors.
The main trade-off in these affordable Melbourne areas is distance from the CBD and employment centers, with Melton and Craigieburn requiring 45 to 60 minute commutes, while Werribee and Cranbourne offer slightly better connectivity but still depend heavily on car transport for daily errands.
You can also read our latest analysis regarding housing prices in Melbourne.
We created this infographic to give you a simple idea of how much it costs to buy property in different parts of Australia. As you can see, it breaks down price ranges and property types for popular cities in the country. We hope this makes it easier to explore your options and understand the market.
Which Areas in Melbourne Offer the Best Rental Yields?
Which neighborhoods in Melbourne have the highest gross rental yields in 2026?
As of early 2026, the Melbourne neighborhoods delivering the highest gross rental yields include Footscray (3011) at around 4.5 to 5.5%, Clayton (3168) at approximately 4.5 to 5%, Preston (3072) at around 4 to 5%, and Sunshine (3020) at approximately 4.5 to 5.5%.
Across Melbourne as a whole, typical gross rental yields for investment properties range from 2.5% in premium eastern suburbs to around 5.5% in well-connected middle-ring areas, with units generally outperforming houses on yield metrics.
These top-yielding Melbourne neighborhoods deliver stronger returns for specific reasons:
- Footscray (3011): Western Health hospital precinct and rail hub create reliable tenant demand without premium prices.
- Clayton (3168): Monash University and Monash Health ensure year-round student and medical professional tenants.
- Preston (3072): Inner-north lifestyle appeal with tram and train access keeps vacancy rates low.
- Sunshine (3020): Improving transport links and affordable entry points attract yield-focused investors.
Finally, please note that we cover the rental yields in Melbourne here.
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Which Areas in Melbourne Are Best for Short-Term Vacation Rentals?
Which neighborhoods in Melbourne perform best on Airbnb in 2026?
As of early 2026, the Melbourne neighborhoods performing best on Airbnb include Carlton (3053), Fitzroy (3065), Richmond (3121), and St Kilda (3182), which consistently achieve occupancy rates between 55% and 70% with average nightly rates ranging from AUD 150 to AUD 280.
In these top-performing Melbourne Airbnb neighborhoods, well-managed properties typically generate monthly revenues between AUD 3,500 and AUD 6,500, though this varies significantly by property size, quality, and seasonal timing.
Each of these Melbourne short-term rental hotspots outperforms for distinct reasons:
- Carlton (3053): University of Melbourne and hospital precinct drive year-round visiting academic and medical demand.
- Fitzroy (3065): Melbourne's cultural and nightlife hub attracts weekend visitors and interstate tourists consistently.
- Richmond (3121): MCG and sporting event proximity creates predictable demand spikes during major events.
- St Kilda (3182): Beach lifestyle and Luna Park draw leisure travelers, especially during summer months.
By the way, we also have a blog article detailing whether owning an Airbnb rental is profitable in Melbourne.
Which tourist areas in Melbourne are becoming oversaturated with short-term rentals?
The three Melbourne areas showing clear signs of short-term rental oversaturation are Docklands (3008), Melbourne CBD (3000), and the high-rise cluster in Southbank (3006), where competition among similar listings has intensified significantly.
In these oversaturated Melbourne areas, there are now thousands of active short-term rental listings, with Docklands and CBD each hosting over 2,000 competing properties and Southbank's high-rise towers adding another 1,500 or more to the supply pool.
The clearest indicator of oversaturation in these Melbourne areas is aggressive price discounting and increased use of promotional rates, as hosts compete for a limited pool of guests, which compresses margins especially now that Victoria's short stay levy adds to operating costs.
We have made this infographic to give you a quick and clear snapshot of the property market in Australia. It highlights key facts like rental prices, yields, and property costs both in city centers and outside, so you can easily compare opportunities. We’ve done some research and also included useful insights about the country’s economy, like GDP, population, and interest rates, to help you understand the bigger picture.
Which Areas in Melbourne Are Best for Long-Term Rentals?
Which neighborhoods in Melbourne have the strongest demand for long-term tenants?
The Melbourne neighborhoods with the strongest long-term tenant demand include Carlton (3053), Clayton (3168), Box Hill (3128), and Richmond (3121), where institutional anchors like universities, hospitals, and major transport hubs create consistent rental demand.
In these high-demand Melbourne rental markets, typical vacancy periods range from just one to three weeks, with well-priced properties in Carlton and Clayton often receiving multiple applications within days of listing.
Each of these Melbourne neighborhoods attracts distinct tenant profiles:
- Carlton (3053): University of Melbourne students, academics, and hospital staff seeking walkable inner-city living.
- Clayton (3168): Monash University international students and Monash Health medical professionals needing proximity to campus.
- Box Hill (3128): Young professionals and families attracted to the major activity center and excellent train connections.
- Richmond (3121): City-edge professionals wanting lifestyle amenities with easy CBD commuting.
What makes these Melbourne neighborhoods especially attractive to long-term tenants is the combination of walkable daily amenities, reliable public transport options, and proximity to major employment or education institutions, which reduces car dependency.
Finally, please note that we provide a very granular rental analysis in our property pack about Melbourne.
What are the average long-term monthly rents by neighborhood in Melbourne in 2026?
As of early 2026, average monthly rents in Melbourne vary dramatically by neighborhood, ranging from around AUD 1,800 for a one-bedroom unit in Footscray to over AUD 6,500 for a three-bedroom house in South Yarra.
In Melbourne's most affordable rental neighborhoods like Footscray (3011), Preston (3072), and Clayton (3168), entry-level one to two-bedroom apartments typically rent for between AUD 1,800 and AUD 2,800 per month.
In mid-range Melbourne rental markets like Box Hill (3128), Brunswick (3056), and Richmond (3121), two-bedroom apartments generally command between AUD 2,200 and AUD 3,200 per month depending on building quality and exact location.
In Melbourne's premium rental neighborhoods like South Yarra (3141), Carlton (3053), and Fitzroy (3065), high-end two-bedroom apartments typically rent for AUD 3,000 to AUD 4,000 per month, while larger townhouses and houses can exceed AUD 6,000 monthly.
You may want to check our latest analysis about the rents in Melbourne here.
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Which Are the Up-and-Coming Areas to Invest in Melbourne?
Which neighborhoods in Melbourne are gentrifying and attracting new investors in 2026?
As of early 2026, the Melbourne neighborhoods showing the strongest gentrification momentum include Brunswick East (3057), Thornbury (3071), Footscray (3011), and West Melbourne (3003), where lifestyle amenity improvements have outpaced property price growth.
These gentrifying Melbourne suburbs have typically experienced annual price appreciation of 4% to 8% over recent years, though gains vary significantly by property type and micro-location within each suburb.
Which areas in Melbourne have major infrastructure projects planned that will boost prices?
The Melbourne areas most likely to see infrastructure-driven price growth include North Melbourne and Kensington near the new Arden station, Clayton and Box Hill along the Suburban Rail Loop corridor, and Parkville near the new underground station.
The specific projects driving these Melbourne infrastructure benefits are the Metro Tunnel, which began service from November 30, 2025 with five new underground stations, and the Suburban Rail Loop Stage One running from Cheltenham to Box Hill with stations at Clayton, Glen Waverley, Burwood, and Box Hill.
Historically in Melbourne, properties within 800 meters of new rail stations have seen price premiums of 5% to 15% within two to three years of service commencement, based on previous infrastructure completions.
You'll find our latest property market analysis about Melbourne here.
We did some research and made this infographic to help you quickly compare rental yields of the major cities in Australia versus those in neighboring countries. It provides a clear view of how this country positions itself as a real estate investment destination, which might interest you if you’re planning to invest there.
Which Areas in Melbourne Should I Avoid as a Property Investor?
Which neighborhoods in Melbourne with lots of problems I should avoid and why?
The Melbourne neighborhoods that investors should approach with extra caution include Docklands (3008), parts of Melbourne CBD (3000), and high-rise sections of Southbank (3006), where structural oversupply and building quality variations create significant investment risks.
Each of these Melbourne areas presents distinct challenges:
- Docklands (3008): High investor concentration, transient tenant base, and variable body corporate management quality.
- Melbourne CBD (3000): Elevated theft incident rates, intense rental competition, and older building stock aging poorly.
- Southbank high-rise (3006): Generic tower oversupply, high body corporate fees, and increasing short-stay restrictions.
For these Melbourne neighborhoods to become attractive investment options, they would need significant reduction in competing supply, improved building management standards, and demonstrated rental yield stability over multiple years.
Buying a property in the wrong neighborhood is one of the mistakes we cover in our list of risks and pitfalls people face when buying property in Melbourne.
Which areas in Melbourne have stagnant or declining property prices as of 2026?
As of early 2026, the Melbourne areas showing price stagnation or decline include parts of Docklands (3008), generic high-rise stock in Melbourne CBD (3000), and investor-heavy towers in Southbank (3006), where oversupply continues to pressure values.
These underperforming Melbourne areas have experienced price stagnation or declines of around 2% to 8% over the past two to three years, with some individual buildings showing even steeper corrections depending on age and management quality.
The underlying causes of weakness differ by Melbourne area:
- Docklands (3008): Ongoing new supply additions and lack of organic neighborhood identity suppress price recovery.
- Melbourne CBD (3000): Post-pandemic office vacancy reducing foot traffic and neighborhood vibrancy affecting demand.
- Southbank high-rise (3006): Interchangeable apartment stock and body corporate fee increases eroding investor returns.
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Which Areas in Melbourne Have the Best Long-Term Appreciation Potential?
Which areas in Melbourne have historically appreciated the most recently?
The Melbourne areas delivering the strongest long-term appreciation over the past five to ten years include Brighton (3186), Albert Park (3206), Fitzroy North (3068), and Hawthorn (3122), where supply scarcity and lifestyle demand have consistently supported price growth.
These top-performing Melbourne suburbs have achieved notable gains:
- Brighton (3186): Approximately 50% to 70% total appreciation over ten years driven by bayside scarcity.
- Albert Park (3206): Around 45% to 65% growth supported by beach proximity and heritage character.
- Fitzroy North (3068): Roughly 55% to 75% appreciation as inner-north lifestyle demand intensified.
- Hawthorn (3122): About 40% to 60% gains backed by prestigious school zones and established amenity.
The main driver of above-average appreciation in these Melbourne areas has been persistent supply constraints from heritage overlays, small lot sizes, and zoning protections, combined with structural demand from families prioritizing school access and professionals valuing walkable urban living.
By the way, you will find much more detailed trends and forecasts in our pack covering there is to know about buying a property in Melbourne.
Which neighborhoods in Melbourne are expected to see price growth in coming years?
The Melbourne neighborhoods best positioned for price growth in coming years include North Melbourne (3051) and Kensington (3031) near the Arden Metro station, Box Hill (3128) and Clayton (3168) along the Suburban Rail Loop corridor, and West Melbourne (3003) benefiting from inner-city regeneration.
Projected growth for these Melbourne neighborhoods varies by infrastructure proximity:
- North Melbourne and Kensington: Expected 4% to 7% annual growth as Metro Tunnel benefits materialize.
- Box Hill (3128): Projected 5% to 8% annually with SRL planning advancing and activity center expansion.
- Clayton (3168): Anticipated 4% to 6% growth supported by SRL station confirmation and Monash precinct demand.
- West Melbourne (3003): Estimated 4% to 6% annually driven by urban renewal and CBD edge convenience.
The single most important catalyst for future price growth in these Melbourne neighborhoods is confirmed infrastructure delivery, particularly the Suburban Rail Loop progressing through planning approvals and the Metro Tunnel's operational track record demonstrating improved connectivity.
We made this infographic to show you how property prices in Australia compare to other big cities across the region. It breaks down the average price per square meter in city centers, so you can see how cities stack up. It’s an easy way to spot where you might get the best value for your money. We hope you like it.
What Do Locals and Expats Really Think About Different Areas in Melbourne?
Which areas in Melbourne do local residents consider the most desirable to live?
The Melbourne areas that local residents consistently rate as most desirable include Albert Park (3206), Fitzroy North (3068), Brighton (3186), and Hawthorn (3122), where quality of life factors like green space, schools, and walkability combine effectively.
Each of these Melbourne neighborhoods appeals to locals for specific qualities:
- Albert Park (3206): Beach access, Albert Park Lake, and village atmosphere within easy CBD reach.
- Fitzroy North (3068): Edinburgh Gardens community, independent retail, and strong neighborhood identity.
- Brighton (3186): Beach lifestyle, prestigious schools, and established family-friendly character.
- Hawthorn (3122): Elite school zone, heritage streetscapes, and excellent train connectivity.
These locally-preferred Melbourne areas typically attract established families with school-age children, dual-income professionals prioritizing lifestyle, and long-term residents who value community stability over investment returns.
Local preferences in Melbourne often differ from foreign investor targets because locals prioritize livability factors like school zones and community feel, while foreign buyers frequently focus on CBD proximity, rental yield potential, and new-build availability due to purchasing restrictions.
Which neighborhoods in Melbourne have the best reputation among expat communities?
The Melbourne neighborhoods with the strongest reputation among expat communities include South Yarra (3141), Southbank (3006), Carlton (3053), and Richmond (3121), where rental availability, transport access, and lifestyle amenities make settling in easier.
Each of these Melbourne neighborhoods attracts expats for practical reasons:
- South Yarra (3141): Strong rental stock, Chapel Street amenities, and easy tram access to CBD jobs.
- Southbank (3006): High apartment availability, arts precinct proximity, and walkable city lifestyle.
- Carlton (3053): University of Melbourne connections, hospital access, and established dining scene.
- Richmond (3121): Diverse food options, city-edge convenience, and vibrant multicultural atmosphere.
The expat profile in these popular Melbourne neighborhoods typically includes young professionals on work visas, international students transitioning to employment, and corporate transferees seeking furnished rental options with flexible lease terms.
Which areas in Melbourne do locals say are overhyped by foreign buyers?
The Melbourne areas that locals most commonly consider overhyped by foreign buyers include Docklands (3008), Melbourne CBD (3000), and parts of Southbank (3006), where marketing to overseas investors has historically exceeded the neighborhood's lived quality.
Locals point to specific concerns in each of these Melbourne areas:
- Docklands (3008): Transient population, limited street-level retail, and lack of established community feel.
- Melbourne CBD (3000): Noise levels, limited green space, and higher crime incident rates than marketed.
- Southbank high-rise (3006): Generic tower design, variable building management, and oversupply pressure.
Foreign buyers typically see these Melbourne areas as attractive due to CBD proximity, new building stock eligible for purchase, and marketing emphasizing "city lifestyle," while locals recognize the trade-offs of high-density living without neighborhood character.
By the way, we've written a blog article detailing the experience of buying a property as a foreigner in Melbourne.
Which areas in Melbourne are considered boring or undesirable by residents?
The Melbourne areas that residents commonly consider boring or undesirable include car-dependent outer suburbs like Melton (3337), Point Cook (3030), and Pakenham (3810), where limited walkability and long commutes reduce lifestyle appeal despite affordable prices.
Residents find these Melbourne areas less appealing for specific reasons:
- Melton (3337): Long CBD commute times of 60 or more minutes, limited dining and entertainment options.
- Point Cook (3030): Traffic congestion on limited road connections, homogeneous housing estate character.
- Pakenham (3810): Distance from Melbourne's urban amenities, reliance on car for most activities.
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What sources have we used to write this blog article?
Whether it's in our blog articles or the market analyses included in our property pack about Melbourne, we always rely on the strongest methodology we can, and we don't throw out numbers at random.
We also aim to be fully transparent, so below we've listed the authoritative sources we used, and explained how we used them and the methods behind our estimates.
| Source | Why It's Authoritative | How We Used It |
|---|---|---|
| Valuer-General Victoria | Official Victorian government source for settled property sales data. | We used it as our primary reference for suburb median prices and transaction volumes. We also validated private index claims against this official baseline. |
| Reserve Bank of Australia | Australia's central bank setting the benchmark interest rate. | We used it to anchor the borrowing cost environment at 3.60% as of December 2025. We factored this rate into yield and affordability calculations. |
| Australian Taxation Office | Official government source for foreign investment property rules. | We used it to define what foreign buyers can and cannot purchase until March 2027. We shaped all recommendations around new-build eligibility constraints. |
| State Revenue Office Victoria | Victorian tax authority for stamp duty and land tax rules. | We used it to quantify the 8% foreign purchaser additional duty impact on total costs. We also incorporated absentee owner surcharge and short stay levy guidance. |
| SQM Research | Long-running independent property data provider with weekly updates. | We used it for near real-time asking price and rent momentum into early 2026. We also used vacancy rate data to identify high-demand rental areas. |
| Cotality (formerly CoreLogic) | Australia's most widely cited housing value index provider. | We used it to verify Melbourne-wide price direction and cycle timing. We cross-checked suburb trends against their methodology-driven index. |
| Domain Research | Major property marketplace with consistent quarterly reporting. | We used it to corroborate Melbourne median prices and recent quarter movements. We also referenced their land value per square meter analysis. |
| PropTrack | REA Group's index provider widely used in Australian housing analysis. | We used it to confirm cycle turning points and suburb-level price movements. We validated stagnation claims against their quarterly data. |
| AirDNA | Leading short-term rental analytics platform with consistent metrics. | We used it to benchmark Melbourne Airbnb occupancy rates and average daily rates. We mapped high-performing areas using their market data. |
| Metro Trains Melbourne | Official operator source for Metro Tunnel service information. | We used it to confirm the November 2025 service commencement date. We identified station precincts likely to see demand uplift. |
| Victorian Government SRL | Official project page for Suburban Rail Loop Stage One. | We used it to identify confirmed station locations from Cheltenham to Box Hill. We prioritized suburbs within these station catchments for growth potential. |
| Crime Statistics Agency Victoria | Official Victorian crime data publisher with local area tools. | We used it to ground "avoid" recommendations in measurable incident data. We highlighted areas with elevated theft and safety concerns. |
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