The magic formula drawing residents back to the heart of Melbourne

People fled Melbourne’s inner suburbs as the pandemic lockdowns dragged on, but two years on, the allure of city fringe life, work and play is proving irresistible.

Convenience, low maintenance environments, less commuting, sustainability, and accessibility by public transport, cycling, or walking to work as well as access to study, food, culture, parks and health services are on the wishlist for people looking to live in the inner city.

For my stories like this, order your copy of the summer 2024 issue of Kanebridge Quarterly magazine.

Melbourne’s inner city suburbs cling to the Hoddle Grid, the 1.6km by 0.8km area laid out to form the central activity area in early 1837 and is among the most desirable locale. Suburbs include Fitzroy, South Melbourne, Carlton, Collingwood, and Abbotsford. Richmond, East Melbourne and South Yarra are bordered by extensive parkland running from the Fitzroy Gardens, through to Yarra Park incorporating the MCG and across the Yarra River to the Domain Gardens. Belle Property partner Sam Fenna, specialising in premium city apartments, says there is an uplift in people who sold up during the pandemic, wanting to return.

A low maintenance lifestyle with easy access to parks and waterways are appealing to inner city residents in Melbourne. Image: Getty

“Some of them had coastal homes or in regional Daylesford and Trentham and we did see a peak of moves during the pandemic,” Fenna says. “A lot of them had boltholes in the city worth $2 million to $3 million and they sold up and went.

“They are starting to come back, saying they miss the action and want something back in the city.

“It’s places like Flinders Lane and all those little pockets of the city.”

Earlier this year, he inked a deal on a London townhouse inspired renovation for just under $2m to a country buyer looking for a city pad with a garage.

Sam Fenna from Belle Property says buyers have missed the vibrancy of the city.

Some of the more popular inner ring suburbs include Fitzroy and Carlton to the north of the city and Richmond and Cremorne to the east. Cremorne, formerly home to Bryant and May matches and Rosella sauce factories as well as the rag trade, has now been dubbed Silicon Yarra and is home to tech giants like Tesla, Seek among others. Employees want to live nearby.

Cremorne and Richmond, known as “Struggletown,” are close to the Melbourne Cricket Ground and Rod Laver Arena, beloved by many sports loving Melburnians.

One measure of popularity is the “walkability” of a suburb, allowing residents to perform daily tasks on foot. Walk Score rates inner suburbs like Carlton as a “walkers’ paradise” followed by Fitzroy, Fitzroy North, Melbourne, St Kilda, South Yarra, East Melbourne and South Melbourne. Victoria Walks, a health charity advising governments and business on increasing walking participation, says the cost savings of living in a “walkable” community are overlooked.

“The ability to choose walking over driving to get to places is priceless,” Victoria Walks executive director Dr Ben Rossiter says.

“It’s better for your hip pocket, for your health and the environment.

“Walking in your neighbourhood is important for building a sense of community connection.”

The walkability of Melbourne’s inner suburbs is attractive to a wide range of buyers. Image: Getty

But not all inner suburbs are created equal, and he suggests anyone looking to buy or rent should spend time walking around the streets to see what they offer and what businesses, services and public spaces the area provides.

Rossiter says lockdowns highlighted the importance of having green space close to home.

“Inner Melbourne is blessed with parks and waterway walks,” he says. “But consider whether you will have to negotiate busy roads to access them. Noisy traffic and long crossing times can be a major disincentive to walk somewhere regularly.”

Also keep in mind that popular suburbs don’t necessarily have thriving shopping strips.

Fitzroys Real Estate 2023 Walk the Strip says the stretch between Lennox and Church streets on Richmond’s Bridge Road is the worst performer with vacancies at 15.5 percent, up from 11.7 percent last year.

Yet, a few blocks away Gourmet Traveller Chef of the Year Thi Le runs two successful restaurants.

Davidson Property Advocates chief executive Tonya Davidson says the inner suburbs of Melbourne are a mixed bag and demand from buyers often depends on price point.

“What we are finding is an interest in high-end apartments. There are overseas people coming back into the market,” she says.

These include buyers with Foreign Investment Review Board approval as well as expats.

Davidson says while inner ring suburbs will always be popular, people are seeing value in the north, just past hip Carlton and Fitzroy to Brunswick and Coburg.

“East Melbourne will always be desirable due to position, transport and access to sporting facilities,” Davidson says. “It is popular with the business and medico demographics.”

It has a median house price over the past year of $3,340,000 for houses and $750,000 for units, reflecting a mix of high-end properties and legacy of smaller units. She agrees that a walk score is important for some inner-city buyers. But that’s not the case for everyone.

Belle Property’s Fenna says while there is an uptake in car sharing, many of his buyers still want access to parking.

Many of these are “lock up and leave” residents who don’t want the big garden but still want to be able to hop in their own car, he says.

By any traditional measure, Australia’s property market should be moving in sync. Instead, it is fragmenting.

New research from MaxCap, led by Head of Research Bruce Wan, paints a picture of a market no longer defined by national trends, but by sharp regional divergence, where performance gaps between cities are widening, and the smartest capital is moving accordingly.

At the top end of the ladder, Perth and southeast Queensland are surging ahead. At the other, Melbourne and Auckland are only just beginning to recover from recent downturns. And sitting squarely in the middle is Sydney, steady but constrained.

The takeaway is clear: the era of relying on headline markets is over.

The rise of the unexpected leaders

Brisbane and the broader southeast Queensland region have emerged as standout performers, driven by population growth, infrastructure investment and a sustained undersupply of housing.

According to the report, housing values in the region have continued to accelerate, supported by long-term tailwinds including the 2032 Olympic Games and a decade of relatively subdued price growth prior.

Perth is telling a similar story, albeit for different reasons. Once heavily tied to commodity cycles, the Western Australian capital is now benefiting from a broader base of economic drivers, including defence spending and sustained resource sector strength.

The result is a housing market that remains one of the strongest in the country, even as price growth begins to ease from its peak.

Sydney holds, but doesn’t lead

For Sydney, the story is more nuanced.

While prices continue to climb and the city remains Australia’s most expensive market, affordability constraints are clearly limiting its pace. Residential growth, while positive, lags behind smaller capitals, and commercial sectors are being held back by softer demand in key industries.

There are, however, signs of momentum building. New infrastructure, including the western Sydney Airport and expanded rail networks, is expected to unlock development opportunities and support future growth, particularly in emerging precincts.

Still, the report positions Sydney firmly in the “middle of the pack”, no longer the automatic frontrunner for investors.

Melbourne’s slow reset

Melbourne, once a consistent performer, has spent recent years recalibrating.

Extended lockdowns, combined with new state property taxes, have weighed heavily on investor sentiment and pricing, particularly across the commercial office sector. Residential values have also underperformed, though for different structural reasons.

Now, there are early signs of recovery.

Improved affordability, population growth and a stabilising economic backdrop are beginning to draw buyers back into the market, with both residential and commercial sectors showing tentative signs of improvement.

Auckland’s turning point

Across the Tasman, Auckland has faced its own challenges, particularly from an outflow of younger workers to Australia, which has dampened demand and stalled price growth.

But here too, the tide appears to be shifting.

A return to positive migration, lower interest rates and policy changes — including the easing of foreign buyer restrictions — are expected to support a gradual recovery, alongside renewed interest from offshore capital.

A market that rewards precision

If there is one unifying theme, it is this: broad-brush strategies no longer work.

MaxCap’s research highlights that the most compelling opportunities are increasingly found outside the traditional powerhouses of Sydney and Melbourne, requiring investors to take a more targeted, locally informed approach.

“Given these persistent performance gaps, there is plentiful scope for alpha returns, just by picking the right locations and market segments,” the report notes.

In other words, success in this market is no longer about being in property — it is about being in the right property, in the right place, at the right time.

And increasingly, that place may not be where you expect.

The magic formula drawing residents back to the heart of Melbourne

In a post COVID market buyers are falling in love with Melbourne’s inner circle once again

New research shows a widening divide across Australia and New Zealand’s property markets, with investors increasingly forced to look beyond traditional strongholds to find real returns.