Melbourne’s surprise hotspot set to drive city’s next property boom

Melbourne is potentially just three months away from becoming a $1m city.

Melbourne is on track to regain its status as a $1m city by the end of spring, and a surprising hotspot has been tipped to help get it there: Frankston.

PropTrack’s latest Housing Price Index released today has revealed a late winter price uptick that added almost $3900 (0.39 per cent) to the city’s $991,000 typical house value in August.

If it maintains that level of growth throughout spring it will break the $1m mark in November — a level not seen since Real Estate Institute of Victoria home value data released in 2021.

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It comes as respected property pundit Terry Ryder has named the City of Frankston as Australia’s fourth best spot to buy a home this spring — with a shock $1m-plus auction result there over the weekend validating the tip.

The bayside council area was given the nod for its coastal locale, major infrastructure works including a $1bn-plus hospital project, and a growing number of apartment approvals.

As part of his Hotspotting report Mr Ryder said the area was “probably the hottest market in Victoria right now”.

“Something’s happening here and it’s become one of the hottest markets, certainly in the state, but also nationally,” he said.

Hotspotting director Terry Ryder believes Frankston is one of the hottest property markets in the country right now.

Frankston’s affordable prices might not last much longer given its beachside allure. Picture: Nicki Connolly.

Ray White Victoria chief auctioneer Jeremy Tyrrell handled a Frankston house sale on the weekend that sold for $1.11m in a five-bidder frenzy, after expectations it would only make it to $850,000.

PropTrack data shows the City of Frankston currently has an $800,000 median house for the municipality, almost double the $422,500 it was in 2015 when the area came with a reputation that has improved significantly since.

Mr Tyrrell said in light of the result it was no surprise to hear Melbourne was on the cusp of a $1m median house price — and that the Frankston area was helping to lead the charge.

“We have been seeing Frankston really starting to move over the last couple of months, there has been a lot of eyeballs there,” he said.

“Especially interstate investors. That was probably one of the early signs, so it’s definitely on the move.”

Mr Ryder’s report also named the City of Yarra, which covers Fitzroy and Richmond, as well as the Geelong region as among the nation’s 10 best places to buy a home this spring.

The list was topped by Queensland areas.

Former footballer Campbell Brown attempted to swim the English Channel in 2015. This year he set off to swim across Port Phillip Bay from Frankston beach. Picture: Josie Hayden.

10 Alfred Place, Frankston, sold for more than $1.11m at auction over the weekend.

But he warned Melbourne was a “real conundrum” for property investors.

“I understand why some people sold up and got the hell out. I considered doing it myself, in fact, because the state government is absolutely a pain in the arse,” Mr Ryder said.

“But suddenly Melbourne is cheaper than Brisbane, much cheaper than Sydney, and it’s roughly on a par with Adelaide and Perth, so great value for money.

“And I think that a whole lot of people are saying, ‘well we’re going to be paying more stamp duty to buy there. We’re going to be paying higher land tax. And the laws that govern the relationship between landlords and tenants aren’t particularly helpful to landlords, but we’re willing to wear that, because we can see that we’re going to get some good growth there’.”

PropTrack’s data shows Melbourne units gained about $1350 in the past month, with their typical value rising to $610,000.

With the city’s high prevalence of flats, townhouses and apartments compared to most other state capitals, it is still Australia’s third most affordable capital overall, behind Adelaide and Perth — with an $831,000 dwelling price, which amalgamates houses and units.

PropTrack senior economist Eleanor Creagh has noted inquiries for Melbourne homes is rising at a time when it is one of the nation’s most affordable capitals.

PropTrack senior economist Eleanor Creagh said Melbourne’s dwelling value had risen 2.1 per cent in the past year, and were now just 0.6 per cent below their peak set in 2022 — according to their data, which differs from the REIV’s $1m-plus record.

It would also make Melbourne the nation’s third $1m house price capital, joining Brisbane and Sydney, according to the PropTrack data.

“It’s somewhat of a milestone for Melbourne, not quite fully recovered, but almost fully recovered after what has been a prolonged period of several years of underperformance for Melbourne’s property market,” Ms Creagh said.

“Demand has re-accelerated in Melbourne, and of course, relative affordability is also likely to be playing a role, with Melbourne now one of the most comparatively affordable capital city markets.”

A number of once affordable Melbourne suburbs are now home to $1m asking prices, including for homes like 11 Short St, Keilor East, which is seeking $970,000-$1.06m.

However, the economist noted it was unlikely the city would imminently move up the nation’s affordability list with Melbourne’s dwelling value growth for the past three months still below that of Adelaide and Brisbane.

“However, if we look at forward looking indicators like inquiries per listing, which is a measure of potential buyer demand, we are seeing that inquiries per listing have lifted significantly in Melbourne over the past year, and it’s close to 90 per cent of suburbs in Melbourne have seen a lift in inquiry per listing,” Ms Creagh said.

“So that does point to the potential for price growth to accelerate into the spring selling season.”

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