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Suburb spotlight: Does Prahran offer an alternative to inner city Melbourne oversupply?

Located five kilometres south-east from Melbourne's CBD, Prahran has long played second fiddle to its neighbour, South Yarra. But it looks as though the suburb is coming into its own.

The difficult-to-pronounce suburb has a mix of medium to high density housing, including public housing estates, Victorian and Edwardian terrace homes.

However, it's Prahran's new unit market that is particularly interesting, says Australian Property Monitors senior economist Andrew Wilson, especially when considering development in Melbourne's CBD.

"We've certainly got a forest of highrises in the city - you don't have to be a rocket scientist to work out that supply is perhaps ahead of demand at this point," Wilson says.

"But there's plenty of demand rising in the inner suburban high rise market, from Brunswick and moving in an arc all the way to Port Melbourne," he notes. "Prahran is part of that epicenter."

While apartment stock in Melbourne's CBD may have outpaced demand, Wilson does not believe the same is the case in Prahran.

"Units have been a bit flat in Melbourne, but the Prahran area is becoming more popular," he explains. "I would expect that to continue."

According to Wilson, the area is starting to match its contemporaries in Richmond, Collingwood and Brunswick.

"They are attracting buyers not just for affordability and proximity, amenities and a higher level of infrastructure, but also lifestyle - the feel of the nieghbourhood."

Prahran is known for its restaurants, bars and shops, particularly along Chapel Street, which runs through Prahran and its neighbours, Windsor and South Yarra. The suburb is also home to one of Melbourne's most well known gay villages, with many gay venues along Chapel Street and Commercial Road.

"Prahran has always been the poor cousin to South Yarra," Wilson explains, "but I think it's changing because of that high density buzz". That "high density buzz" is something the producers of reality television show The Block Glasshouse are betting on, with reminders each episode that the Prahran office conversion apartments sit in a trendy and contemporary neighbourhood.

According to Wilson, the current median price for a unit in Prahran is $530,000. After a drop in demand in the latter half of 2013, he says price growth has increased in the past six months. According to Wilson, Prahran's growth will be sustained by a trend towards apartment living, particularly among younger buyers looking for a smaller spatial footprint, and who don't necessarily require a backyard or large accommodation.

"Developers have a good turnover of stock in that area, particularly from younger buyers looking for affordable living," he says, though he notes that the area is becoming less affordable for some.

"I would certainly expect to see demand continue to outstrip supply - developers in that area can't get enough. It's a bit different to a couple of kilometres down the road."

Houses in Prahran may also appeal to those looking for low maintenance, small homes with a higher budget, with many cottage offerings. According to RP Data, July saw a median house price of $1,177,000 million in Prahran.

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