Beyond the median: 10 Melbourne property case studies that outperformed…and why 

According to Cotality, since its daily index began at the start of 2010, Melbourne house values have risen by around 4% p.a., which is only about 1.3% p.a. above inflation.  

But of course, not every property has delivered such a mediocre result. That begs the real question: which types of properties have outperformed over this period, and what explains their outperformance? 

What does median data tell us?  

I have previously covered the limitations of property data. Suburb level data is not especially useful for making specific investment decisions, largely because the sample can be too small and be skewed by the types of properties sold and how much growth was driven by capital improvements in a particular quarter. 

That said, capital city median house data can be a reasonable indicator of broad sentiment and market direction over time. The problem is that median data does not compare like-for-like properties. It is simply the midpoint of all sales in a period (typically quarterly), so the result is heavily influenced by what is sold, where it sold, and which parts of the market were most active. 

By contrast, the Cotality Daily Home Value Index uses a hedonic model designed to compare apples with apples. It adjusts for property attributes such as location, land size, and dwelling characteristics (bedrooms, bathrooms, car spaces, and so on), so it is comparing sales of broadly similar properties. 

Because this dataset begins at the start of the 2010 calendar year, and the index is anchored to 100 at inception, we can calculate annualised performance over the past 16+ years. That is what I have set out in the table below. 

Despite its almost never-ending rain, Sydney has outperformed Melbourne by 1.84% p.a. since the start of 2010. On a $1,000,000 property, that compounding gap is worth more than $600,000 in today’s dollars (roughly $2.5 million versus $1.9 million). 

My thesis about this data  

My thesis is that, in any market, a significant proportion of properties will outperform the median. And given Melbourne has been a relative underperformer over the past 16+ years, I thought it was worth exploring what attributes appear to have contributed to individual properties outperforming over that period. Not all properties have made bad investments over this period 

Therefore, if we can identify, with any confidence, the attributes that have driven strong returns in the challenging Melbourne market, investors can potentially use them as a decision framework when buying into any market, regardless of whether it is in a growth phase or a flatter part of the cycle. 

Picking outperformance is easy… but 

Identifying recent “outperformers” is not especially hard, because a lot of the heavy lifting has been done by broad market forces in certain sectors.  

Regional and coastal areas experienced a major boom since 2020, driven in part by prior period underperformance and the Covid-era shift in demand. 

Similarly, Covid and the tightening in borrowing capacity (as I’ve discussed previously) pushed buyers towards more affordable properties and locations, which has also shown up as relative outperformance. 

But I wanted to avoid leaning on these broad trends because they tell us more about the market cycle than the fundamental attributes of individual properties.  

The same logic applies to renovations: older, unrenovated stock has tended to underperform compared to fully renovated homes, largely due to the step increase in construction costs through the Covid period. 

Consequently, we have seen more expensive locations struggle on a relative basis.  

That is why my focus is on investment-grade locations, where the “tide” has generally been flat to declining. In those markets, when a property has outperformed, it is more likely to reflect the property’s specific attributes rather than simply being carried by favourable market sentiment. 

Here are 10 property sales, picked at random 

As noted above, I have focused on sales in investment-grade locations where the holding period was reasonably long (median period is almost 10 years). I did come across several transactions with holding periods of only two or three years and very strong percentage gains. However, I have excluded those sales because the outcome is more likely to reflect perfect timing than underlying property fundamentals. 

It is also worth highlighting that the 10 transactions I selected span a mix of locations, holding periods, purchase dates, and sale dates. In other words, they sit across different market conditions, including both buoyant phases and more challenging periods. The median outperformance (alpha) in this dataset is 2% p.a. which is not insignificant. 

Before I get into the data, it is worth highlighting a few important points first. 

This analysis is not statistically reliable 

The first thing I need to point out is that this exercise is not statistically reliable. I have selected sales at random, simply to see whether any common attributes appear to be associated with stronger capital growth outcomes. 

Even if I analysed the full dataset, I am not convinced it would materially improve the confidence of the conclusions. Many important variables are not captured in the available statistics, which I discuss below. 

Therefore, I want to be to be clear, I am not presenting this analysis as definitive. At best, it is anecdotal evidence that may help frame the discussion, not necessarily a basis for high-confidence decisions. 

I don’t know anything about the sales campaigns 

One of the most important drivers of a property outcome, for both the buyer and the seller, is simply how well the sales process is executed. The selling method alone (off-market, private sale, auction) can materially change the result, and the “right” strategy often depends on market conditions. 

The problem is I cannot measure the quality of the campaign. I do not know the number of bidders at auction, or how many offers were received in a private sale. Those variables would tell us a lot about demand, competition, and whether the campaign actually did its job. Nor can I properly account for the influence of the agent, which can be significant. 

In a buoyant market, quality properties often sell themselves. In a tougher market, the agent’s skill matters far more: setting realistic vendor expectations, pricing strategically, and maximising buyer competition through inspection traffic and negotiation. 

These factors are difficult to quantify, but they cannot be ignored. They can meaningfully influence the outcome, independent of the property itself. 

Possible attributes that drove alpha  

I have written before that property is part art, part science.  

The “science” is the set of rules you can apply to improve the odds of selecting a good investment. For example, when you buy, a lot more than 50% of the total value should be in the underlying land, because land is the component that tends to drive most of the long-term capital growth. 

The “art” is the nuance. Seemingly minor characteristics can be decisive in certain streets, pockets, or buyer segments. That is why deep local knowledge matters and why leaning on someone who lives and breathes that market, such as a good buyer’s agent, is vital.  

Because it is a mix of art and science, it is difficult to precisely isolate what has driven outperformance. These 10 sales have outperformed, and while I am not claiming perfect causation, there are a few clear commonalities worth highlighting. 

Structural scarcity  

The common thread amongst these properties is desirability. These properties are in suburbs that offer a genuinely “walkable lifestyle”, with everyday amenities close by and easy to access on foot. 

Most are also positioned well within their suburb: quiet streets, attractive pockets, and the parts of the suburb that buyers consistently pay a premium for. The main exception is Greythorn Road, which is a busy road. It is no surprise that it delivered the lowest “alpha” of the 10.  

The bigger takeaway is structural scarcity. In these established suburbs, supply is inherently constrained. Subdivision rarely stacks up economically because land values are already high, so the stock of homes tends to be fixed. Meanwhile, demand persistently exceeds supply, and it is diversified enough to remain resilient over time. The walkable lifestyle is a big part of that, because it creates an enduring, practical reason for buyers to keep competing for the same limited pool of properties. 

Another interesting overlay is school zones. Many of these properties sit within highly regarded public school catchments and/or close to desirable private schools, which tends to underpin demand and broaden the buyer pool. 

Renovations that improved value and marketability  

Northcote, Yarraville, and Middle Park all benefited from renovations. Where the renovation costs were material, I have adjusted for them when calculating the growth rate. 

In practice, the renovations likely added value above and beyond their direct cost because they improved marketability. That has been especially true in recent years, when many buyers were reluctant to take on renovation risk given the potential for cost overruns, particularly through the Covid period. 

I have written before about a value-add property strategy because it can be an attractive approach. It complements the idea of allocating most of your initial budget to underlying land value, then making improvements post-acquisition to enhance the property’s value, improve the income profile, and increase tax benefits (depreciation). 

Location demographics  

These properties are all in areas with above-average household incomes. I have written about this before because, over multi-decade periods, income and wealth demographics are a major driver of property growth. 

In the absence of a sustained expansion in borrowing capacity (which I think is unlikely), it is the demographics of future buyers that determine how much more can be paid for property in that location. That comes back to their wealth, their income, and the stability and growth of those income sources. 

Things that didn’t seem to matter  

It is probably just as useful to call out what did not appear to impair growth. 

First, land size did not seem to be a key driver. The smallest property was in Albert Park on 105 square metres, and the largest was in Balwyn North on 766 square metres. But most of the properties, specifically in Middle Park, Fitzroy North, Hawthorn, Yarraville, and Fairfield, were in the 150–300 square metre range. 

Clients sometimes ask whether they would be better off buying in a “secondary” suburb simply to secure more land, especially compared to inner suburbs where blocks are typically much smaller. The reality is it is more about quality than quantity, and this data supports that view. 

The other observation is heritage restrictions. Several of these properties are subject to heritage overlays, yet that does not appear to have been a drag on performance. If anything, in the right locations, heritage can help preserve the character and scarcity that buyers value.  

So, it’s entirely possible to outperform 

I have previously argued that property investors should consider where a location sits in the property cycle, because most markets rotate between growth phases and flat periods. 

That still matters.  

But this analysis suggests you can outperform even in a flat market if the property’s fundamentals are strong. 

More importantly, the objective in property is not simply to maximise returns over the next 10 years. The real benefit comes from compounding capital growth over many decades. Ideally, we hold a property for 20 to 30 years (or longer), backed by fundamentals that can deliver capital growth that meaningfully exceeds the median over that full period, on average, not just in a single cycle. That’s why the above-mentioned attributes are so important to focus on.