The Melbourne suburbs where buyers pay a premium for space

Home buyers in 10 Melbourne suburbs are paying more than $10,000 per square metre of land, mostly due to the small block sizes and semi-detached houses in popular inner-city areas.

But buyers looking for the best value for money will have to go as far as 60 kilometres from the CBD, where a square metre of land can cost as little as $313.

The most expensive suburb by area was Albert Park, where the median one-metre by one-metre patch of dirt set buyers back $14,419 over 2023. The median block size of houses sold in the suburb was 162 square metres, Domain’s Price Per Square Metre Report 2024, released on Thursday, found.

Albert Park was followed by East Melbourne at $13,025 per square metre, with a median 253 square-metre block and Middle Park at $12,916 per square metre, with a 185 square-metre block. The three suburbs are among the most expensive in Melbourne; each recorded a median house price of more than $2 million and of them, East Melbourne was the most expensive at about $3.3 million.

Domain head of research and economics Dr Nicola Powell said proximity to the city played a major role in determining the price per square metre. Melbourne’s overall median price per square metre was $1838.

“Buyers are willing to pay a premium for a [smaller] space, a terrace home in expensive suburbs,” Powell said. “Some buyers don’t want the larger block in an outer suburb where you get better value.”

Albert Park is a prestigious suburb with small blocks, and remains popular despite a high price per square metre.Credit: Stephen McKenzie

Toorak, Melbourne’s most expensive suburb, showcased the reverse of this effect, Powell said. Its median house price was about $4.34 million, but the price per square metre was $9550.

Toorak is dominated by free-standing houses on large blocks. Powell compared the suburb to Fitzroy, where the median price was $1,664,000 and the price per square metre was $12,000.

“Fitzroy, overall, barely has any houses,” she said. “Only 3.2 per cent.”

Quantify Strategic Insights head of data and insights Angie Zigomanis agreed buyers would pay a premium for space in the inner city. “I think you’re paying for location and at the end of the day, the value of property, as people say, is embedded in the land,” he said.

“People are willing to pay the most based on location and amenity and not based on size.”

Powell said another major factor was the mix of free-standing, semi-detached and apartment buildings in each suburb.

“Exactly what I would expect is the areas that have a higher proportion of apartments and terrace homes would have higher price per square metre,” she said. “In Albert Park, 62 per cent of properties are terraces or semi-detached houses. It’s 18.8 per cent for houses and it’s 18.6 per cent for apartments or units.

“What it shows in Albert Park is a heavy swing towards medium density. It’s using land in an inner-city location in an efficient way. Imagine the [median] price … if it were all houses.”

Belle Property Albert Park principal David Wood agreed the area’s small blocks and proximity to the city fuelled its high price per square metre.

“It’s the popularity of those suburbs [Albert Park and Middle Park], that are strong heritage suburbs and have strong heritage controls. They love living close to the city, and they’ll pay up,” he said.

Wood said the actual prices achieved per square metre spread over a large spectrum, mostly because of the top end of Albert Park’s and Middle Park’s markets.

“There are a lot of larger blocks in Albert Park … that are closer to $10,000, [because of] their unimproved houses,” he said. “We’re seeing up to $25,000 per square metre for renovated houses. The top end has done a lot of heavy lifting because of the expensive nature of improvement.”

The lowest price per square metre was in Gembrook, a large suburb in Melbourne’s outer east, just north of Pakenham Upper. There, buyers could expect to pay about $313 per square metre of land. The median house price in Gembrook was $1,248,000 over 2023.

Bell Real Estate managing director Trevor Bell said the price per square metre was of little consequence for buyers in the area, who were more concerned with privacy and the land’s suitability for building a home. The median block size in Gembrook was 4000 square metres.

“When people are moving from the suburbs to the area here, it’s a lifestyle decision, and it’s about privacy,” Bell said. “You can get privacy on a quarter-acre block, it can be on two acres, you can get it on five acres.

“A flat quarter-acre block will go somewhere in the mid $500,000s and a steep block will go for about $300,000 to $350,000. There’s quite a variance in prices depending on the steepness of the land.”