Melbourne property market poised for strong growth with affordable suburbs leading recovery

Melbourne’s property market is showing strong signs of recovery with 63 per cent of suburbs now positioned for growth, according to the latest Hotspotting Price Predictor Index.

Several outer suburbs have been identified as likely to experience significant price increases, with Sunbury in the city’s northwest ranked as the nation’s top location for potential house value growth.

The report by property analyst Terry Ryder identifies Craigieburn, Werribee, Caroline Springs, Hoppers Crossing and Deer Park as other areas primed for substantial house price increases in the coming months.

“It’s the beginning of a strong upward trend, and relative to other cities Melbourne is now very attractively priced,” Ryder said.

The forecast is based on a 16.4 per cent rise in sales activity across Melbourne, which Ryder uses as a metric to track increasing demand likely to underpin rising prices.

Sunbury has seen quarterly sales surge from 140 in early 2023 to 250 in the final quarter of 2024, suggesting significant buyer interest in the area.

The recovery follows a challenging period for Melbourne’s housing market, which experienced flat or falling values from early 2022 until late 2024 while other capital cities recorded growth.

Melbourne is now ranked as the third-best positioned region nationwide for property value growth in the year ahead, behind only Darwin and regional South Australia.

“In a years time, we should see Melbourne doing much better than recent years,” Ryder said.

The apartment market is also expected to see substantial growth, with units in Docklands, Hawthorn East, Richmond and St Kilda identified as likely to experience “supercharged” price increases.

Limited new housing supply combined with rising investor activity and population growth are identified as key factors driving the anticipated price rises.

Raine and Horne Sunbury’s Amanda Burt confirmed the suburb’s property market has already “changed significantly” compared to a year ago.

“Buyers are coming from Airport West and Niddrie, where they can’t afford the homes anymore, but they see Sunbury is still 35 minutes from the city,” Burt said.

Real Estate Institute of Victoria president Jacob Caine cited several factors pointing to a price lift for Melbourne in 2025, including the city’s comparative affordability, strong economy and cultural attractions.

“When you look around the country, you see that Melbourne prices are comparatively affordable, but while Melbourne and Brisbane have historically traded places as the second most affordable capital, there’s only so long Melbourne ever slips back,” Caine said.

PropTrack senior economist Anne Flaherty added that Melbourne’s relatively lower prices compared to other major capitals would help attract migration both internationally and interstate.

“And, on top of that, Melbourne has a very diverse economy, with a lot of opportunities for jobs,” Flaherty said.

According to the Hotspotting report, median house prices in the “supercharged” suburbs range from $610,000 in Werribee to $735,000 in Caroline Springs, while unit prices in growth areas vary from $505,000 in St Kilda to $619,000 in Collingwood.