Whatever one's attitude to the Gatwick and the idea of the scarred, dank interiors being turned into million-dollar apartments by the next round of contestants on the reality TV behemoth, the sale of the hotel to Channel Nine for a reported $15 million is a bellwether of gentrification creeping inexorably into an area still known for its wildly varied inhabitants.

"A lot of inner city areas are still a work-in-progress in regards to gentrification," says Domain Group chief economist, Dr Andrew Wilson. "St Kilda obviously ticks a lot of boxes in terms of transport, the bay, its proximity to the city??? it's only a matter of time."

Melbourne's most-storied suburb has withstood rampant gentrification far better than its bayside neighbours. Partly it's the colourful notoriety of a suburb known for more than a century as a place the attracted the poor, the artistic and the - ahem - "colourful". It was immortalised by Albert Tucker in his Images of Modern Evil series of the 1940s, became the chrysalis of Aussie punk in the 1970s and '80s thanks to notorious venues such as the Crystal Ballroom (located at the heritage-listed George Hotel), and is still home to the city's demi-monde.

Jim Giannopoulos, of Chisolm & Gamon Elwood, says the huge variety of people and dwellings is what makes St Kilda special. "I don't think it will ever lose that, and I don't think we should want it to lose that either."

The agent in charge of selling a huge 1154-square metre site on Robe Street, currently home to the Sacred Hearts' aged care facility (set to move to new premises nearby), Giannopoulos says development opportunities are plentiful in St Kilda, which means that eventually the tide of upward mobility will engulf its eclectic mix of apartments and period homes.

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The median price of a house in St Kilda has risen by a cool 35 per cent over the past year to $1.35 million (the average apartment has dropped 3.3 per cent to $503,000). It has been outstripped by St Kilda East, where the average house costs $1.695 million, and St Kilda West, where the average house will set you back $2.06 million.

Sam Hobbs of Marshall White Port Phillip says it's pertinent to St Kilda's reputation that it has lagged behind Elwood and Windsor in the price stakes. "You'd think being closer to the city than Elwood that it would logically be more expensive. The colourful nature of the area does have effects - it's certainly got a lot of growth potential. You do get good value here. Compared with Albert Park it would be half the price per square metre."

Hobbs points to the upmarket, leafy Crimea Street, Charnwood Road, Wordsworth Street and St Leonards Avenue as pockets that attract moneyed buyers for their large period houses on large blocks. Other parts, he says, "you need to be a really St Kilda person to live there".

Hobbs points to signs that, Gatwick or no, Fitzroy Street is already experiencing a resurgence of fortune after being in the doldrums for the better part of the decade. "You've got Supernormal Canteen just opened, you've got the Victorian Pride Centre moving in, you've got a lot of things going on." As The Block executive producer Julian Cress said to Fairfax Media, "I think that everybody who lives (in St Kilda) knows they live in one of the most beautiful parts of Melbourne. It's right by the beach, it's an outstanding place to live."

81/3 Alfred Square, St Kilda

Photo: Hocking Stuart

$700,000-$750,000
2 bedrooms, 1 bathroom, 1 car space

Here's an affordable entry to one of Melbourne's most vibrant suburbs, where there is never a dull moment. The location of this large apartment is prime; there are few better spots by the bay.

Alfred Square curves off The Esplanade, with the foreshore reserve and Catani Gardens opposite, and where the new owner will surely spend most Sundays. From the top floor of a traditional block, the apartment captures ocean views, and the buyer will be able to smell the salt mingled with espresso from nearby Fitzroy and Acland streets.

Wake up in the main bedroom to city vistas, and then take coffee on the balcony overlooking the water. There is scope to add value to this pad, with the older kitchen ripe for a refurbish. The bright bathroom has been jazzed up, making it more than comfortable. Included in the floor plan is a study nook.

Auction: 12.30pm, August 26
Agent: Hocking Stuart, David Sullivan 0409 517 838