Holiday rentals often offer property owners a way to generate income through short-term stays. This option often brings higher rental revenue than traditional leases. When choosing a suburb, you want to consider the specific location and how this affects demands and overall profits.
Another key factor to consider is local regulation. As you look for a suburb with strong short-term rental demand, you also want to avoid locations with strict council restrictions. Research past occupancy trends and ensure the suburb aligns with your target guests: families, travellers, or holidaymakers. Below is a quick overview of the top Melbourne suburbs for holiday rentals.
St Kilda
This suburb features a beach culture and attractions like Luna Park. It is located 6 km southeast of Melbourne’s CBD and offers a strong short-term rental market.
Key metrics
The short-term rental returns in St Kilda are moderate, and the occupancy rates align with Melbourne’s average. Properties are booked for most of the year, and the median Price is lower than in other bayside suburbs.
Tourism
St Kilda hosts many festivals and events throughout the year. It is close to Melbourne’s city centre and has a well-connected public transport system.
Investment considerations
Effective January 1, 2025, Victoria introduced a 7.5% levy on short-stay accommodations, including those in St Kilda. Additionally, owners’ corporations now have the authority to ban short-term rentals within their complexes if 75% of owners agree.
| Metric | Houses | Units |
| Median Rent (House) | $595 per week (Yield: 2.82%) | $530 per week (Yield:5.50%) |
| $1,270,000 | $1,270,000 | $500,000 |
| Occupancy Rate | 68% (Melbourne average) | 68% (Melbourne average) |
Albert Park (and Middle Park)
These suburbs are located approximately 3 kilometres south of Melbourne’s CBD. They boast a heritage architecture and are close to the renowned Port Phillip Bay.
Key metrics
Rental yields are relatively low, with houses in both suburbs commanding premium rents. As you will notice in the table below, this region has a high entry cost, but the demand for rentals remains steady due to the desirable location.
Tourism
Both suburbs offer beautiful beaches and parks, which attract local and international visitors.
Investment considerations
The 7.5% levy on short-term rentals impacts potential returns in these two areas.
| Metric | Albert Park | Middle Park |
| Median House Price | $2,287,500 | $2,550,000 |
| Median Weekly Rent | $868 | $900 |
| Rental Yield | 2.32% | 2.09% |
Brighton
This suburb is located approximately 11 kilometres southeast of Melbourne’s CBD. It is home to affluent neighbourhoods and beautiful beaches.
Key metrics
The area enjoys premium home values and strong rental demand. Rental yields for houses are modest, while units offer slightly better returns. As you will notice, the entry costs are a bit high, but the market demand is solid.
Tourism
Most tourists visit Brighton to explore the area’s dining and shopping destinations. Like most suburbs on this list, it experiences seasonal demand, which peaks in summer.
Investment considerations
All the regulations that affect short-term rentals in Victoria, including the 7.5% levy on short-stay accommodations, also apply to short-term rental properties in Brighton.
| Metric | Houses | Units |
| Median Price | $3,300,000 | $1,215,000 |
| Median Weekly Rent | $1,350 | $795 |
| Rental Yield | 2.11% | 3.50% |
Port Melbourne
The area offers urban living with a relaxed beachside atmosphere. Its rich maritime history and modern amenities make it an attractive choice for residents and investors.
Key metrics
If you are considering this market, note that demand and occupancy fluctuate. However, you will enjoy a good short-term rental return over time.
Tourism
Port Melbourne is close to the Spirit of Tasmania ferry terminal, scenic beaches, and vibrant café culture, which make it a popular tourist attraction.
Investment considerations
While the suburb offers attractive peak demand in summer, you should take note of the recent 7.5% levy on short-stay accommodation. Additionally, owners’ corporations can now implement rules to ban short-term rentals within their developments.
| Metric | Houses | Units |
| Median Price | $1,552,000 | $738,800 |
| Median Weekly Rent | $795 | $700 |
| Rental Yield | 3.00% | 4.54% |
Williamstown
This suburb is located 9 kilometres southwest of Melbourne’s CBD. It is known for its family-friendly atmosphere, historic sites and modern amenities.
Key metrics
Before settling for Williamstown, note that the region enjoys a steady housing demand, but some regions might have high entry costs.
Tourism
Williamstown’s waterfront promenade, historical maritime museum, and dining options attract visitors year-round. Seasonal events and markets offer a relaxed coastal lifestyle near Melbourne’s city centre.
Investment considerations
Williamstown enjoys decent growth and can be a great spot if you are in for better short-term rental returns. However, you should factor in the 7.5% levy on short-term accommodation.
| Metric | Houses | Units |
| Median Price | $1,585,000 | $700,000 |
| Median Weekly Rent | $750 | $550 |
| Rental Yield | 2.43% | 4.13% |
Mornington (Mornington Peninsula)
This suburb is located an hour’s drive south of Melbourn. It offers an affordable coastal lifestyle that attracts local and international tourists.
Key metrics
Mornington is a renowned tourism hub. This suburb enjoys above-average occupancy year-round. The rental returns are also commendable.
Tourism
The area’s seasonal events, combined with the beautiful beaches, Mornington Racecourse, and the busy main street with many cafes and boutiques, make Mornington an active tourist hub year-round.
Investment considerations
Besides the 7.5% short-stay levy on short-term rental properties, the Mornington Peninsula Shire requires property owners to register their short-stay accommodations or else risk a fine of $1188 from the Shire.
| Metric | Houses | Units |
| Median Price | $1,100,000 | $770,000 |
| Median Weekly Rent | $685 | $570 |
| Rental Yield | 3.29% | 3.68% |
Mount Martha
Located on the Mornington Peninsula, Mount Martha is another suburb that promises a relaxed lifestyle, thanks to the picturesque beachfront setting.
Key metrics
Like most areas in Mornington Peninsula, Mount Martha enjoys moderate short-term rental yields. Units offer slightly higher returns than houses. Occupancy rates fluctuate seasonally but peak in summer due to strong tourism demand.
Tourism
Mount Martha features scenic beaches, coastal walking trails, and busy local markets. The suburb experiences periodic fluctuations, with peak tourism during the summer months.
Investment considerations
Like the other suburbs in Mornington Peninsula, short-term rentals within Mount Martha must be registered, plus it attracts the 7.5% Levy imposed by the state of Victoria.
| Metric | Houses | Units |
| Median Price | $1,445,000 | $772,500 |
| Median Weekly Rent | $808 | $620 |
| Rental Yield | 2.92% | 4.29% |
Sorrento (and Portsea)
These two suburbs are known for their elite coastal setting and ultra-premium property markets. They attract affluent visitors, especially during summer.
Key metrics
The suburbs’ seasonal demand drives strong short-term rental income, but rental yields are relatively low. Occupancy rates peak during holiday periods.
Tourism
Both suburbs feature pristine beaches, upscale dining, and exclusive golf courses, which draw high-net-worth individuals. The summer months see a surge in visitors and spike the demand for short-term luxury accommodations.
Investment considerations
In addition to the 7.5% levy, investors should be aware of the pronounced seasonality and that local councils and owner’s corporations have the authority to regulate or ban short-term rentals.
| Metric | Sorrento | Portsea |
| Median House Price | $1,850,000 | $3,350,000 |
| Median Weekly Rent | $720 | $925 |
| Rental Yield | 1.96% | 1.30% |
Elwood
This serene coastal suburb in Melbourne is known for its tree-lined streets and proximity to Elwood Beach. It offers urban convenience and an idyllic seaside setting, which makes it a sought-after location for holiday home investments.
Key metrics
Unlike most suburbs, the occupancy rates around Elwood remain high year-round, with peak demand during the summer months. Here, houses provide lower yields than units.
Tourism
Elwood attracts visitors who come to explore its beaches and lively café culture. This suburb experiences steady tourism year-round, with a slight increase during the summer months.
Investment considerations
Elwood presents stable rental demand due to its desirable location within Melbourne’s bayside belt. However, you should be aware of the 7.5% levy and any updates on local regulations.
| Metric | Houses | Units |
| Median Price | $2,100,000 | $650,000 |
| Median Weekly Rent | $1,000 | $515 |
| Rental Yield | 2.36% | 4.12% |
Frankston
This suburb is located approximately 41 km southeast of Melbourne’s CBD. It is an emerging holiday home investment suburb known for its affordable rental market and promising growth prospects.
Key metrics
As a new market, this suburb is a top pick for investors. The occupancy rates are moderate due to the growing infrastructure and attractive coastal lifestyle.
Tourism
Key attractions in this area include the Frankston Waterfront, beautiful beaches, and the renowned Frankston Arts Centre. Seasonal events and festivals are also popular in the region, all of which draw visitor year-round.
Investment considerations
This suburb’s high rental yield and affordability make it a go-to spot for holiday home investors. Still, you need to factor in the 7.5% levy and the mandatory annual registration required by the Frankston City Council.
| Metric | Houses | Units |
| Median Price | $730,000 | $526,500 |
| Median Weekly Rent | $550 | $470 |
| Rental Yield | 4.05% |
4.85% |
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