After several years of cost pressures, cautious buyers, and tight funding, Melbourne’s medium and high-density property sector is showing some signs of recovery, according to RPM's Melbourne Apartments and Townhomes Market Report for August 2025. Three rate cuts in 2025, stronger lending environment, and Victoria’s surging population are driving momentum back into the market.
Owner-occupiers are back, led by first home buyers at their most active in a near three year high. In Q2 2025, Victoria recorded 10,188 first home buyer owner occupier loan commitments, making up 42% of all new owner-occupier loans.
Investors are also re-engaging, with 34% of loans in Q2, the highest level since 2022. Investors are also the second largest group in Victoria's residential market. Relative affordability compared to Sydney and Brisbane, combined with strong rental demand, is reinforcing Melbourne’s appeal.
Melbourne’s unit market is outperforming houses, with median values up 1.3% in Q2 2025 to $635,000, compared to 0.4% growth for detached homes. Middle-ring suburbs were the standout, up 2.6% to $714,000, while the inner ring saw modest growth (+0.3%). With outer ring prices remaining flat, but still at the highest level since late 2022.
On the supply side, approvals remain soft. Townhome approvals in Greater Melbourne reached 2,293 in Q2 2025, only slightly higher than the previous quarter but below 2024 levels. Apartment approvals fell to 1,781, a 56% quarterly decline and the second-lowest result since early 2023.
Developers continue to face elevated delivery costs and lingering stock, but sentiment is shifting. APRA’s easing of presale requirements (from 100% to 50–70%), alongside three rate cuts, is expected to boost project feasibility.
Meeting Victoria’s broader housing needs will require a stronger focus on townhomes and low-rise apartments, the ‘missing middle’ suited to well-connected middle-ring suburbs.
Challenges remain: construction costs are still high, labour shortages persist, and approvals need to lift to keep pace with demand. But compared to 12 months ago, conditions are far more desirable.
For developers, the opportunity lies in delivering well-located, design-led townhomes and apartments that align with shifting buyer expectations.
