The high-end Melbourne suburbs where first-home buyers can nab a bargain

Melbourne's property market may still be soft, but for first-home buyers, that's exactly where the opportunity lies - including some prime suburbs.

While other capital cities such as Brisbane and Sydney have seen unit prices soar over the past year, Melbourne's unit market has remained soft, offering a rare window for buyers to enter some of the city's most desirable suburbs at more accessible prices.

According to PRD's newly-released Smart Moves: Capital Cities Edition 1st Half 2025, median unit prices fell by 2.6 per cent year-on-year to $610,327, while total sales dropped by 6 per cent.

Houses also saw a downward trend, with median values dropping 2 per cent Q1 2024 to Q1 2025, and total sales dropping by 7.1 per cent.

This declining trend is in sharp contrast to other cities. In Brisbane, for example, unit prices climbed by an eye-watering 12.8 per cent over the same period.

"Out of all the unit markets around Australia, it is definitely the Melbourne market that is still in recovery mode," said PRD Chief Economist and report author Dr Diaswati Mardiasmo.

"A lot of other markets are already in growth mode, so this softness presents a unique opportunity, especially for first-home buyers."

What has been holding prices back?

Melbourne has long been a high-supply city, with faster building approval processes than other states and strong historic demand from foreign capital.

But that shifted in the wake of the pandemic, along with policy changes that impacted investors.

Dr Mardiasmo notes that the city endured the longest lockdowns, which took a toll that it's still recovering from.

"Melbourne really lost a lot of momentum due to the impact of COVID, followed by policy change that affected investors and saw them pull out of the market," Dr Mardiasmo said.

This freed up stock in areas that would typically be out of reach for first-time buyers.

"The result has seen a loss of international students, fewer foreign investors, and now, with higher interest rates, a softer market with more stock."

Speaking of stock, Dr Mardiasmo explained that Melbourne has traditionally led the country in new unit approvals, averaging 12,000 to 13,000 per year, far outpacing Sydney and Brisbane.

But the city has been facing an oversupply of "residual apartments"; remaining unsold units left over from previous new developments. This has also helped to keep prices in check.

In fact, PRD data shows that vendor discounts have increased, with unit sellers accepting an average of 3.6 per cent below listing prices.

"It's a buyer's market," Dr Mardiasmo said.

"People know the market's soft, so they're not willing to pay more than they have to.

"Unless a property has something exceptional to justify a higher price point, like a rooftop or garden, buyers aren't biting."

Australia's affordable and liveable capital city

PRD's Smart Moves: Capital City Edition 1st Half 2025 report looks at a range of data points like affordability, liveability, investment and development to identify Melbourne's 10 most 'affordable and liveable' suburbs.

The top three suburbs, which met all criteria, included Williams Landing, Maribyrnong and Epping.

A further seven suburbs were listed that missed one or more of the criteria but still provided excellent 'affordable and liveable' opportunities outside Melbourne metro.

These include North Melbourne, South Yarra, Hawthorn, Kensington, Ormond, St Albans and Carlton.

"The beautiful thing is these include some really nice areas," said Dr Mardiasmo.

High-end suburbs, lowered barrier to entry

Well-regarded suburbs, like South Yarra, Hawthorn and Ormond, have recorded price drops despite their CBD proximity and high desirability.

According to the PRD report data, South Yarra's median unit price fell 9.9 per cent year-on-year to $540,000.

Ormond units dropped by 3 per cent, to now sit at a median of $577,500, and Hawthorn slipped by 1.8 per cent to a median of $557,500.

"Areas like South Yarra, Hawthorn and Ormond are definitely seen as desirable, and for good reason," said The Agency partner, agent and auctioneer, Luke Saville.

"They've got that blend of lifestyle, walkability, proximity to the CBD, and a bit of prestige factor that first-home buyers and downsizers alike are drawn to.

"Even in a softer market, those fundamentals haven't changed."

Mr Saville notes that while Melbourne has a lot of new builds, these areas offer older stock, and that is a good thing.

"The unit stock in these areas tends to be older. A lot of '60s to '80s walk-ups, which is actually a plus in many cases," he said.

"They're usually bigger, better built, and in smaller blocks with lower fees.

"Buyers are getting savvier and starting to appreciate that over newer high-rise stock, which often comes with higher costs and less long-term certainty."

For those considering new builds, these price points fall under Victoria's First Home Buyer property cap, meaning buyers can also access government grants and incentives.

"We're seeing units available in places like South Yarra and Hawthorn that, even now, are eligible for first-home buyer support," said Dr Mardiasmo.

"That double opportunity - softer prices and access to grants - is a key opportunity."

A 'measured' time to buy

The Melbourne market's perfect storm has created a "silver lining" for first-home buyers willing to act.

Because despite the current softness, the market isn't expected to stay this way forever.

Melbourne has nearly $68 billion worth of development projects in the pipeline for 2025, according to the PRD report.

Population and migration rebounds are also eventually expected, along with further rate cuts.

But right now, there's a "measured" and calm feel in the market. Read: it's a great time to make a purchase, especially if it's your first.

"The current market may be softer, sure, but there's a definite sense of opportunity, especially for first-home buyers," said Mr Saville.

"There's less FOMO, more room to negotiate, and not as much competition at opens.

"The buyers who are active right now are serious, and if a property's well priced and well presented, it's still moving. It just feels a bit more measured out there."