Undervalued suburbs in Melbourne for 2026: where I think the catch-up growth is hiding

Melbourne’s value moment

I don’t think Melbourne is broken. I think it’s been in a reset. The city hasn’t had the same price run as Perth, Adelaide or Brisbane, and it’s still sitting below its prior peak. That lag matters, because value shows up when sentiment is soft but household demand is still there.

A lot of the pressure has been investor-driven (land tax changes, holding cost pain, rate shocks). When investors step back, prices pause — especially in unit-heavy suburbs. But owner-occupiers don’t vanish. They just wait. Now I’m seeing the early signs of demand re-appearing, while prices in a handful of suburbs still look like they were frozen two years ago.

The best way I can summarise this: the gap between “what a suburb is worth in day-to-day life” and “what the median says” has widened. That mismatch is where catch-up growth usually comes from.

What “undervalued” means in practice

I’m not hunting cheap for the sake of cheap. Undervalued, to me, is a suburb that has the ingredients for growth but is priced below close substitutes without a real lifestyle or amenity disadvantage.

The first clue is a clear relative value gap — a big price step between a suburb and its neighbours that doesn’t make sense on a map or on a Saturday morning walk. The second clue is cycle timing: a suburb that has lagged while nearby areas boomed, and is now seeing demand quietly firm up. Third is future catalysts — transport, renewal, new job nodes or civic upgrades that keep pushing convenience inward over time. Finally, I don’t ignore yield. If rents are strong relative to prices, it’s usually a tell that value is being under-priced.

If you want the longer version, that’s what sits behind our Value & Growth Matrix. It’s the lens I’m using here.

The five suburbs I think are most undervalued

These aren’t “sure things”. Nothing is. They’re simply the suburbs where the value gap looks most obvious to me right now, across a mix of houses and units, with a tilt to capital growth and enough yield to hold comfortably.

St Kilda East

St Kilda East is the cleanest example of Melbourne value I can see. Recent suburb-level analysis shows houses here are about $348,000 cheaper than neighbouring inner-south bayside-style suburbs that offer a very similar lifestyle and CBD access. That is a rare gap in a location this close to the city. You can read that data directly in this undervalued Melbourne suburbs breakdown.

The reason the suburb looks “held back” is mostly structural — years of heavy apartment supply diluted medians, then investor demand fell away. But the amenity never changed. Tram lines, parks, café strips, schools, and a short hop to both the CBD and the bay are still the same. When supply normalises and confidence returns, suburbs like this usually snap back quickly. I see St Kilda East as a short-term to medium-term catch-up story (0–5 years), with a long runway after that because inner-ring scarcity never really goes away.

Box Hill North

Box Hill North is a “next door suburb” that gets the benefit of a major centre without the major centre’s price tag. The current median house figure is around $1.37m, with price growth roughly flat over the past year (about 0.7%). Units sit much lower — a typical 2-bedder is around $753k — and yields in that unit market are sitting in the mid-3% range.

That stagnation is exactly why I like it. Box Hill proper has already absorbed years of demand, migration and infrastructure expectations. North hasn’t. Yet it shares the same orbit: hospitals, retail, train lines, and the long-term effect of big transport upgrades. I treat Box Hill North as a medium-term value play (3–5 years) that becomes a long-term winner as that orbital pull keeps widening.

Noble Park

Noble Park is where affordability meets connectivity. The median house price is sitting around $808k with very steady annual growth (about 4–5% over the last year). The unit market is cheaper again and yields are strong — roughly 4.5% gross in recent data. That yield matters. It tells me renters already value the suburb even when buyers hesitate.

Noble Park also has a classic lag profile. Surrounding south-east suburbs lifted hard earlier in the cycle. Noble Park didn’t. It’s still cheaper despite similar freeway access and a rail spine that makes CBD commuting realistic. I see this as a short-to-mid term catch-up suburb (0–5 years), with upside beyond that because the south-east corridor keeps deepening in jobs, education and household demand.

Doreen

In the outer north, Doreen is the “quiet affordability” play. Median houses sit around $770k, annual growth has been modest (about 2–3%), and properties are selling quickly — median time on market is about three weeks. Rental yields hover in the mid-3% range, which is fine for a growth suburb at this price point.

The reason I’m keeping Doreen on the list is the reset dynamic. It didn’t participate in the earlier northern surge the way Mernda and Epping did, but the rail line, schooling and family demand pipeline are now established. Outer suburbs with rail access tend to do very well once a city shifts back toward affordability. I see Doreen as a medium-term opportunity (3–5 years) that can turn into a strong long-term performer if Melbourne’s north keeps absorbing population pressure.

St Albans

St Albans is the west’s value workhorse. Median houses are still sub-$700k (about $691k) despite a solid 12-month lift of roughly 5–6%. Units are around $520k with yields about 4.5%, which is rare value in a suburb that has a major train terminus and constant rental demand.

I like St Albans because it’s structurally undervalued rather than trend-undervalued. The west is getting more connected and more employment-dense over time. Sunshine is improving fast. When a neighbouring centre accelerates, the closest affordable alternative usually benefits next. I see St Albans as a long-term catch-up suburb (5–10 years), with the kind of yield that lets you hold without bleeding while that story plays out.

How I see the next 0–10 years playing out

My near-term expectation (0–2 years) is that Melbourne continues re-rating as a “value capital city” again. That doesn’t mean a boom everywhere. It means buyers start choosing suburbs that look like bargains next to their neighbours, and the gap closes quickly once auction rooms tighten. St Kilda East and Noble Park are the two I think fit that early-cycle snap-back profile best.

In the medium term (3–5 years), I think you’ll see more measured, broad-based growth as rate pressure eases and Melbourne’s population engine does what it always does. That’s the window where Box Hill North and Doreen should benefit from their corridor positioning and affordability.

Over the long term (5–10 years), suburbs tied to transport spines and renewal corridors tend to win — provided supply stays sensible. St Albans is my pick in that bucket. It is not “instant gratification value”; it’s “buy and look back later value”.

To be clear: these are forecasts, not promises. A suburb can be undervalued and stay undervalued for longer than you want. Timing is part luck, part patience, and part discipline on what you buy within the suburb.

Risks that can break a value thesis

The biggest risk in an undervalued suburb is not the suburb — it’s the wrong asset inside it. If supply can explode quickly (high-rise approvals, cheap townhouse infill in identical stock), growth can get capped. That’s why I’m always picky on block scarcity, street quality, and whether there is a real owner-occupier pull.

The second risk is borrowing fragility. If you buy a “value” suburb but stretch your cashflow to do it, you don’t actually own optionality — the bank does. Value investing only works when you can hold long enough for the market to agree with you.

The third risk is assuming all price gaps must close. Some don’t. Sometimes a gap is actually a market signal about amenity, stigma, or supply. The trick is being honest about whether a gap is irrational or structural. The five suburbs above look irrational to me today. That can change.

A lending lens for buying undervalued suburbs

Undervalued suburbs are usually a “margin game”. You’re buying when the consensus is still lukewarm, so the aim is simple: keep your loan structure flexible enough to hold, and cheap enough to not leak returns.

If you’re planning a Melbourne purchase now, I’d treat lending as part of the strategy, not the afterthought. Get the structure right first, then buy the asset. That’s exactly what we do on the Mortgage Broker Melbourne side — work through borrowing capacity, buffers, and lender appetite for the specific suburb and property type.

If you already own in Melbourne, don’t let loan pricing quietly erode your upside while you wait for growth. A quick check through our rate review calculator can show whether your current rate still holds up. It’s one of the simplest ways to improve the “hold” part of the value equation.

And lastly: value investing on leverage works best when you’re calm. Don’t over-trade. Don’t assume you need to buy the biggest or newest thing. Buy something scarce, in a suburb that is under-priced, and let time do the heavy lifting.

Bottom line

Melbourne doesn’t look undervalued as a whole if you zoom out. But when you zoom in, the gaps are obvious. The city has been through a sentiment reset, and that reset has left pockets behind even when the lifestyle and infrastructure story is still strong.

My view is that St Kilda East, Box Hill North, Noble Park, Doreen and St Albans are five suburbs where the gap between price and lived value looks widest. Some will move sooner, some will take longer. None are guaranteed. But if you’re hunting for Melbourne’s next catch-up cycle with a bit of yield to hold, this is where I’d start.