TIP OF THE MONTH

Townhouses and Villas: Melbourne’s Property Sweet Spot

Townhouses and villa units are enjoying surging popularity due to their hybrid appeal—they offer more space than apartments, but with lower maintenance demands than standalone houses.

This property type has struck a chord with:

• First-home buyers, who are priced out of freestanding homes,
• Downsizers, seeking to simplify without compromising on comfort,
• Investors, looking for solid rental yields and growing demand.

As of March 2025, the median house price in Melbourne is $916,763, while the median unit price sits at $604,574—a 46% difference that positions townhouses as the “middle ground” between cost and liveability.

Apartments: The Undervalued Segment Set for a Comeback?

While apartments haven't shared the same level of enthusiasm in recent years, that may be about to change.

Flat performance—but not forever:
Over the past decade, Melbourne apartments have seen minimal capital growth—especially when compared to houses. This is a notable departure from earlier market cycles where apartments and houses performed more closely in line.

Current apartment median:
Inner-city apartment prices have grown just 1.5% in the March 2025 quarter, lifting the median to $597,000. But prices remain below where they were 12 months ago, reflecting a market that’s still emerging from a correction.

Why the tide may turn:

• Undersupply: Only 400 new apartments were completed in Q1 2025—on track for the lowest annual supply since 2008. With only 5,900 units under construction (mostly build-to-rent), the supply pipeline is extremely limited.
• Rising rents: Demand in the rental market is surging, with median apartment rents up 4.5% in the last year, and one-bedroom apartments leading the charge. This signals increasing investor appeal and a tightening market.
• Vacancy rates remain low: Despite some seasonal fluctuations, inner-Melbourne vacancy is at 3.0%, still below the long-term average.
• Relative value: With house prices significantly outpacing unit prices over the last 10 years, apartments are now looking fundamentally undervalued. For many, this represents an opportunity to buy into well-located suburbs at a significant discount.

The Outlook: A Two-Speed Market with a Catch-Up on the Horizon

While townhouses and villa units remain the hottest segment in 2025, industry analysts are eyeing the apartment market for future growth. The fundamentals—tight supply, rising rents, and a historic lag in price growth—suggest apartments may soon play catch-up, especially in lifestyle and transport-connected areas.

For buyers and investors, the message is clear:

• Townhouses offer immediate value, broad appeal, and strong ongoing demand.
• Apartments may present a counter-cyclical buying opportunity, particularly for those taking a longer-term view.

In Summary:

Melbourne’s evolving market is rewarding properties that balance affordability, function, and location. Townhouses and villas are leading today, but the apartment segment—after a decade of underperformance—may be the quiet achiever in the years to come.