Melbourne homebuyers could be getting a near-identical lifestyle for six figures less, with some of the city’s best-value pockets right next door to overpriced hotspots.
SuburbData rated St Kilda East’s median home price $253,000 below comparable surrounding suburbs such as Elwood.
St Kilda had the second-largest gap from its neighbours at $236,000, followed by Box Hill South at $124,000 and Maidstone at $95,000.
Jacana, Carnegie, Niddrie, Yallambie, Ascot Vale and Briar Hill all offered discounts compared to surrounding suburbs ranging from $52,000 to $85,000.
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The analysis classified suburbs as undervalued when house prices sat below similar surrounding markets despite no clear geographic disadvantage and local supply-and-demand conditions were showing signs of improvement.
But the label did not mean a suburb was cheap, guarantee future growth or suggest every individual home represented a six-figure saving.
At the other end of the scale, Parkville and Deepdene were each rated $250,000 above comparable nearby markets, followed by Armadale at $226,000, Black Rock at $225,000 and Caulfield at $222,000.
SuburbData also considered the gap between house and unit prices, previous capital growth and whether buyer demand was beginning to strengthen relative to the number of homes available.
SuburbData analyst Jeremy Sheppard said Melbourne arguably had more undervalued markets than Australia’s other major capitals after years of weaker growth than Brisbane, Perth and Sydney.
Changes affecting property investors, increased housing construction and softer buyer demand had contributed to Melbourne’s underperformance, although Mr Sheppard expected some of those pressures to diminish over time.
“It’s not just compared to direct neighbours,” Mr Sheppard said.
“A lot of the other areas nearby have had more growth, or in some cases it’s the undervalued suburb that had the decline.”
He said identifying markets with strong growth potential had become more difficult as property conditions weakened.
“During boom times, like in 2021, markets like that were easy to find,” he said.
“You throw a dart on a board and hit one. Now you need to know where to look.”
However, Mr Sheppard warned buyers entering markets rated as overvalued with small deposits could face negative equity if prices fell and their circumstances forced them to sell.
“The risk is that if you buy in a market like this, your home may sit there for a while without getting any return on your investment, or values may fall and you go into negative equity,” he said.
“That may not be a problem if you plan to stay there 10 years, but you also never know when your circumstances change.”
Matthews Agency director John Matthews said Maidstone, Niddrie and Ascot Vale gave buyers proximity to the CBD without the entry prices commanded by some of their better-known neighbours.
He said Ascot Vale attracted young professionals moving from North Melbourne, Flemington and Kensington in search of larger blocks while retaining an inner-city lifestyle.
The suburb offers Union Rd shops, train and tram services and is close to the Melbourne Showgrounds and Flemington Racecourse.
“Ascot Vale is really good value because the bigger money gets paid in Moonee Ponds and Essendon,” Mr Matthews said.
He said families who could not afford Essendon were increasingly considering neighbouring Niddrie, where they could remain close to established private and government schools.
“People can’t quite afford to get into Essendon, but Niddrie is right next door and you can still get access to all the good schools,” he said.
A $1.2m budget could still secure a standard three-bedroom house on a full block of about 650sq m in Niddrie, Mr Matthews said.
The same budget in Ascot Vale was more likely to buy a single-fronted home on a block of about 200-300sq m.
Mr Matthews said Maidstone was another compelling option for buyers and investors seeking proximity to central Melbourne on a tighter budget.
He said worsening congestion was also prompting homeowners from Greenvale, Caroline Springs and other outer suburbs to consider moving closer to the city.
Parley Property Advisory buyer’s agent Luke Assigal said investors from Sydney and Brisbane were also beginning to recognise Melbourne’s relative value.
“Compared with the other states, Melbourne is definitely undervalued,” Mr Assigal said.
“Melbourne still has the population, employment opportunities and infrastructure. The question is why those fundamentals are not currently reflected in its property values.”
But he warned buyers against assuming every affordable suburb beside an expensive market would inevitably catch up.
“You cannot simply assume that because one suburb is performing strongly, every adjoining postcode will follow it,” he said.
Mr Assigal said the potential saving from crossing a suburb boundary depended on transport, amenity, demographics, housing stock and the quality of individual streets.
“In some cases, crossing into the neighbouring suburb might save a buyer $100,000,” he said.
“In other cases, the difference might only be $20,000 or $30,000.”
He pointed to Carnegie, rated $78,000 below surrounding markets, as an established suburb offering train access, a strong food culture and many of the lifestyle factors buyers sought in Malvern and Malvern East.
But he said buyers still needed to assess individual pockets, with homes beside major infrastructure potentially affected by noise, outlook or construction.
“Buyers need to understand whether the suburb itself is essential or whether the lifestyle and amenity it offers can be found elsewhere,” Mr Assigal said.
“Unless someone has an unlimited budget, they cannot have everything. They need to decide whether the property or the location is critically important.”
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Originally published as Melbourne: New research exposes massive $253k suburb price gap
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