Melbourne's Best Performing Suburbs This Year

This past year has seen median house prices slowing in most Melbourne suburbs - but some areas are bucking the trend.

EAST: KEW

The leafy inner-city suburb of Kew has been Melbourne's best-performing suburb this year, as it has been for the past five years. Noel Jones Kew director Bruce Severns says the vast majority of new residents choose Kew because of its proximity to schools such as Carey Grammar, Genazzano and Xavier College.

He says many Kew buyers tend to move from inner-eastern and northern suburbs such as Abbotsford, Richmond, and Fairfield around the time their second child arrives.

"Inner-city terrace homes are fine for a couple, and maybe big enough to cope with a first child," says Mr Severns. "But by the time a second child comes along, and especially starts walking, families want bigger homes surrounded by more land."

Another group of "new Kew" buyers migrate from the middle and outer-eastern suburbs, again choosing Kew because of its proximity to schools.

"Buyers put up with a lesser home in Kew than what they're used to, just to get their foot in the door," said Mr Severns. Buyers come from out as far as Blackburn, Box Hill and Templestowe, he says.

Most buyers anticipate a 20-year stay in Kew before downsizing, usually to something in the area, he adds.

Entry-level homes in Kew - three-bedroom terraces without parking and in liveable but not exceptional condition - typically start at about $600,000. Bigger, basic homes, such as weatherboard and cream brick homes built in the 1960s and 1970s, fetch about $800,000, Mr Severns says.

Kew's two most prestigious pockets are known as the Sackville Ward (which includes the streets around Sackville Street) and Studley Park, which includes Molesworth and Fellows streets.

In May, a record Kew price was set when the 120-year-old Italianate La Verna mansion in Sackville Street sold for about $12 million.

Mr Severns says there is a lack of small, high-quality townhouses and apartments in Kew for empty nesters to relocate to.

"It's common for buyers to sell a five or six-bedroom family home for about $3 million, and buy a smaller, newer home for between $1.8 million and $2.5 million," Mr Severns says.

According to the Real Estate Institute of Victoria, Kew has recorded a 44.8% increase in median values for the year ending July 31, 2008 - up to $1.495million.

Since 2003, median values in Kew have recorded an annual growth rate of 16.4%, pipping other strong-performing eastern suburbs such as Balwyn (14.1% annual growth rate to $1.245 million) and Hawthorn (13.7% annual growth rate to $1.217 million).

SOUTH: MENTONE

On paper, the bayside suburb of Mentone may be 28% cheaper than neighbouring Beaumaris, but on or around Beach Road, prices don't vary much at all.

Hocking Stuart Mentone senior sales consultant Irene Casey says top-end buyers relocating from within the area don't discriminate against suburbs from Ricketts Point Marine Sanctuary in Beaumaris through to Mentone, Parkdale and Mordialloc.

"Many people moving from the city, however, tend to start off border-specific, usually drawing the line at Beaumaris," Ms Casey says. "But once they cross over and see the beaches and full range of facilities available in Mentone, most open themselves up to opportunities there."

Ms Casey says the presence of strong-performing schools, including Mentone Girls Secondary, Mentone Grammar and St Bede's College, was a drawcard for families.

Top-end homes on and around Beach Road in Mentone would be worth in excess of $2.5million, MsCasey estimates.

At the opposite end of the market - otherwise known as "the airport side of Warrigal Road" - unrenovated homes on blocks of around 600 square metres can still be picked up for about $500,000, while houses under one of the Moorabbin Airport flight paths can sell for as little as $450,000.

The closure of the airport would increase overall median values in Mentone by at least 10%, Ms Casey says, considerably closing the gap between it and Beaumaris.

Some buyers with a budget of $500,000 often look at suburbs south of Mentone - including Edithvale (median of $525,000), Chelsea ($460,000), Bonbeach ($491,000), Carrum ($438,000) and Seaford ($345,000) - where they can pick up cottage-style homes on reasonable blocks of land within walking distance of the beach.

They choose these suburbs rather than buy homes in the streets immediately surrounding the airport, Ms Casey says.

According to the REIV, median values in Mentone increased 36.4% to $750,000 for the year to July 31. Mentone was the seventh-best performing suburb in metropolitan Melbourne and the second-best performing southern suburb after Albert Park.

Beaumaris median values for the year ending July 31 increased 16.2% to $960,000.

WEST: BRAYBROOK, MAIDSTONE

Few suburbs in Melbourne offer better bang for your buck than Braybrook in Melbourne's west, but you might really have to use your imagination to find personality in some of its most affordable pockets.

Just eight kilometres from town, original 1930s homes on blocks of around 600 square metres can be snaffled for around $300,000.

This compares to Coburg North, Canterbury or Caulfield - all the same distance to the CBD as Braybrook - where only apartments can be purchased with that budget.

According to the REIV, Braybrook was Melbourne's second-best performing suburb in the year ending July 31 in regard to median house price growth, but was only one of several western suburbs to star.

An average home in Maidstone, a pocket of West Footscray abutting Braybrook but closer to the CBD, will now set you back an average $435,000 - up 38% since last July.

In nearby Sunshine, the average house price surged 35.1% to $344,500, while in Altona North, a five-minute drive to Altona Beach, median values were up 37% to $415,000 for the year.

The inner north-western suburb of Flemington recorded a 35.6% increase in median values to $585,000.

Biggin & Scott Maribyrnong director Renzo Tomasino says in the past few years home buyers and investors have been finding their budgets no longer buy homes in Seddon, Yarraville or Footscray, the suburbs closest to the CBD.

He says it is only recently that buyers have had the confidence to invest in the more middle-ring western suburbs, many of which are less than 10 kilometres from town but cost far less than the Melbourne metropolitan average.

Mr Tomasino says ultimately people choose to buy, invest and rent in Braybrook and Maidstone because the suburbs offer big blocks and quick, easy access to the CBD and south-eastern suburbs.

He says the Maribyrnong River precinct of both Braybrook and Maidstone is among the most sought-after by prospective purchasers.

NORTH: NIDDRIE

Niddrie is the fancier name given to the pocket of Airport West that abuts Essendon, about 10 kilometres north-west of the CBD.

The suburb enjoys plenty of similarities with Essendon, Melbourne's most expensive north-western suburb, including wide streets, big blocks and a selection of original weatherboard and red or cream brick houses built since the 1950s.

It's also well-serviced by public transport (train, tram and bus) and close to some of the best private schools in the region, including Penleigh and Essendon Grammar, Lowther Hall and StColumba's College.

However, the cost difference between Niddrie and Essendon is almost as steep as Rosehill Road, one of two streets that divide the two suburbs. The other dividing street is Hoffmans Road.

According to the Real Estate Institute of Victoria, Niddrie's median house value soared 40% in the year ending July 31, 2008, to $595,000. The median house price in Essendon is considerably higher, at $813,000, but increased by 24.8%.

Across Melbourne, median values increased a more modest 15.3% (to $448,000) over the same period. Most of that rise happened in 2007, when the market was still booming.

Brad Teal selling agent Greg Plummer says Niddrie appears on the radar of new buyers who can't afford the more expensive "family-home" suburbs in the north-west, including Essendon, Moonee Ponds and Strathmore.

He says in recent years developers have targeted Niddrie because of the suburb's big blocks, often able to yield up to four units. The median unit and apartment price in Niddrie is $388,000, according to the REIV, about the same price as a house a year ago.

Nurse Natalie Withoos moved to Niddrie from Gisborne in the early 1990s.

She lived in a house in Hutchison Street, near Steele Creek, with her husband Robert, before moving to a house in Nolan Street, on the Essendon cusp.

"We were first-home buyers and everything in Essendon was out of our reach," she says. "But we did look there first. Ultimately, we wanted something close to the city, and at a reasonable price. In Niddrie, we were close to the Keilor Road and Puckle Street shops and transport, DFO and Highpoint, plus five minutes from the Maribyrnong River and several parks."

The family were planning to renovate the four-bedroom Nolan Street weatherboard and extend into the massive back yard, but unexpected news of a third baby has forced a change of plan.

"We now want to buy something in the area that we can live in and renovate around," she says.

Brad Teal Real Estate is marketing the unrenovated house at 51 Nolan Street on a 659-square-metre block for $619,000.

** The REIV's annual statistics are based on sales of houses between August 1, 2007, and July 31, 2008, as reported by the agencies.

As a guide to the performance of a suburb, annualised figures are statistically more accurate than the more commonly quoted quarterly figures viewed on the REIV website, which only feature three-month samples of properties sold.