RPM VIC Apartments & Townhomes Market Report - April 2026 by RPM Group

April 2026

Whats Inside

Executive Summary

Michael Staedler

General Manager

Research, Data & Insights

m.staedler@rpmgrp.com.au

As of the end of 2025, Victoria maintained strong fundamentals. Interstate migration held strong, and the state recorded three consecutive quarters as a net intrastate migration destination. Long term housing demand continued to build.

Victoria’s built form market ended 2025 on a high, but early 2026 rate rises quickly reversed the momentum.

Home purchasing activity lifted sharply in the final months of 2025, driven by recovering market sentiment and the federal 5% Deposit Scheme. Loan volumes across all buyer types reached a near five year high, with investors returning to the Victorian market in meaningful numbers. Melbourne’s middle and outer ring unit markets, where a significant share of stock qualifies under the 5% Deposit Scheme, posted strong price growth over Q4 2025. Across Melbourne, unit price growth outpaced detached houses for the period.

Townhome approvals have stabilised, but apartment approvals appear to be sliding back into a downward trend as developers concentrated on launching and completing existing projects. The Mid-Rise Code,

which streamlines approvals for 4 to 6 storey buildings, offers some cause for optimism and is expected to start showing up in approval numbers over the medium term.

That optimism has since run into harder reality. Two interest rate rises since the start of 2026 have hit consumer confidence hard, and conditions for builders and developers have tightened considerably. Construction materials and freight costs are both escalating. The pressure looks likely to persist, and net new dwelling supply will be impacted.

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Disclaimer: This dataset represents the latest available data as of April 2026. however, the economic outlook continues to evolve rapidly. Although reasonable care has been taken in the preparation of this information, RPM Real Estate Group Pty Ltd take no responsibility for the accuracy of the information contained herein. It is recommended that all the information be verified if it is to be used for commercial purposes.

Market Fundamentals

Apartments Market Financing Outlook

Daniel Gradwell

Associate Director of Property

How has the financing outlook for medium and high-density residential development shifted as the cash rate rises and construction cost pressures intensify?

Heightened awareness is probably how I’d categorise it. We’re being pretty proactive by talking to builders, developers, contractors. Our construction managers are busy trying to understand what pressures they’re actually seeing today, both on price and material availability.

There are real concerns emerging, but it’s not a bad news story yet. We haven’t had builders coming back to developers saying costs are going to blow out to x, y and z. It’s nowhere near what we saw during COVID, where supply shortages were a lot more widespread. What’s different this time is that experience is still pretty fresh in memory; I think people have their eyes more wide open going in.

For developers, interest rates are still not the main game. The construction cost story is what we’re watching very closely.

For developers, interest rates are still not the main game. The construction cost story is what we’re watching very closely.

What impact has the federal government’s 5% deposit scheme had on apartment demand?

It’s been night and day. Now that we’ve had six months of the scheme operating, you can really see the difference it’s made to the lower end of the market.

The property price cap for Melbourne sits at $950,000, which covers pretty much all units. Nationally, the lower quartile has grown about 50% faster than the rest of the market over that period. In some markets it’s been even more stark. Perth was up around 13% in six months just at that lower end, and that’s a market that was already running hot.

It’s a very predictable policy outcome, but the numbers are pretty astonishing. Good for the people that can use it, but it’s clearly pushing up prices for the next round of purchasers in coming years.

Has ANZ changed its lending settings, and what are financiers actually looking for right now?

Nothing has changed from ANZ’s point of view. We’re still active, and the market is just as competitive as it’s been for the last two or three years on the financing side.

Where I do think the goalposts have shifted is around contingencies. For a while we kept seeing feasibilities come through looking to get by with around 2.5% contingency. I think those days are probably gone. You’d want at least 5% facing into this environment. That ties into the tender piece too. Some builders are only holding tenders valid for 14 or 15 days now, which is just acknowledging that things can move pretty quickly.

Contract structure is the other one. During COVID the industry got more comfortable with cost-plus contracts. That’s probably going to continue here. From a banking perspective, cost-plus is harder to get fully comfortable with. It doesn’t rule a project out, but it does slow things down. And on purchaser profile, it’s not a mechanical input to our risk models, but owner-occupier weighted projects are preferable to investor-heavy ones.

Australian Economic Indicators

Despite slowing job creation nationally, Victoria has accounted for a third of all new employment growth in the country over the past year.

Population Growth in Victoria

Victoria’s population has reached 7.1 million residents.

In the year to Q3 2025, the state added 122,010 new residents, with just over 30,000 of those arriving in Q3 alone. Near term growth has picked up as net overseas migration recovers, and Victoria continues to account for around 30% of the nation’s total population growth.

Q3 2025 also marked the third consecutive quarter of positive net interstate migration for Victoria. Melbourne’s relative affordability compared to Brisbane and Adelaide is a growing factor, making the state an increasingly attractive destination for people considering a move.

Despite the strong gains, Victoria’s population at the end of FY2025 was at 7,073,859, above the state government’s projection of 7,060,162 due to softer growth in Q4 2025. That gap is expected to close by the end of FY2026.

Components of Population Change

Natural Increase ■ Net Overseas Migration ■ Net Interstate Migration

Source: Australian Bureau of Statistics

Buyer Activity

Victorian Home Purchasers

Victoria recorded over 43,000 new loans in Q4 2025, the first time quarterly activity has cleared 40,000 since June 2022 and the third highest single quarter result in over a decade. The lift was broad based across all buyer types.

The federal 5% Deposit Scheme was a key driver. From 1 October 2025, available places became uncapped, income thresholds were removed, and price caps were raised. In Victoria, the scheme now covers properties up to $950,000, capturing a large share of medium and higher density dwellings across metropolitan Melbourne and detached houses in middle and outer ring suburbs.

Confidence at the lower end flowed through to the wider market. Investor loans reached a record high, accounting for 36% of all loans written in Q4 2025. First home buyers held at exactly a quarter of total activity, a slight share dip despite rising in absolute numbers.

Home Purchaser Loan Size

Average loan sizes are at record highs across all buyer types.

The most significant movement was among first home buyers. After years of relative stagnation between 2021 and 2023, and only modest gains since, FHB average loan sizes had jumped sharply to a record $561,000 in Q4 2025, up 7.4% compared to the same quarter a year prior. The 5% Deposit Scheme was the clear catalyst, enabling buyers to enter the market sooner and at higher price points than would otherwise have been possible.

Subsequent home buyers saw the largest dollar jump, with average loan sizes rising nearly $50,000, to $752,000. This is a 6.6% increase from Q4 2024, pointing to a meaningful shift in sentiment in the middle and upper markets. Buyers appear to be trading up, using stronger sale proceeds from their existing homes alongside larger loans to do so.

Investor loans averaged $617,000 in Q4 2025, up 2.1% year on year. Given investors are typically more sensitive to pricing due to yield and return considerations, even a modest uplift is notable, particularly if it is not supported by corresponding rental growth.

Proportion of Loans by Type

Melbourne Unit Market

Laurence Rao Research Manager Research, Data & Insights laurence@rpmgrp.com.au

Melbourne’s unit market gained momentum, with price growth outpacing houses. Overall unit values reached a three year high of $656,500 in Q4 2025, up 2% on the previous quarter, and ahead of the 1.8% recorded for houses over the same period.

Rate cuts have helped lift price growth across the broader market, but policy is doing more of the heavy lifting. The 5% Deposit Scheme heavily favours medium and high density dwellings, particularly in Melbourne’s middle and outer rings where a significant share of stock is priced under the $950,000 threshold. In the inner ring, effectively only high density products qualify.

Unit price growth in Melbourne outpaced house price growth, with strong performance in the middle and outer rings.

Middle ring values hit $757,500, a four year high, while outer ring units reached an all time median high of $650,000. Quarter on quarter growth came in at 2.9% and 2.5% respectively, well above the inner ring’s 0.8% and the broader house market’s 1.8%.

Taken together, Melbourne’s unit market appears to be recovering in earnest. Three rate cuts through 2025 restored confidence, and migration data reinforces the picture, with Melbourne drawing demand from other cities (Brisbane and Adelaide in particular).

Both owner occupiers and investors returned to the Victorian market at the end of 2025 with considerably more conviction than they showed six to nine months ago.

Overall

$656,500

Median Unit Prices by Location - Q4 2025 Source:

Melbourne Unit Market by Region

Middle and outer ring unit values are at multi year highs, with quarterly growth outpacing inner ring units.

Median Unit Price Change by Region Median Unit Price by Region

Inner ring: 0-10km radius around Melbourne CBD. Middle ring: 10-20km radius around Melbourne CBD. Outer ring: 20km+ radius around Melbourne CBD, including the Mornington Peninsula. $300,000

Source: REIV and RPM Research, Data, and Insights Note: Units include all dwellings that are not detached houses.

Vacancy Rates and Rental Stock

Melbourne’s rental vacancy edged down to 2.4% at the end of 2025, holding within the 2.4% to 2.5% range it has occupied since late 2024.

Inner and middle ring vacancy rates have been largely stable, finishing the year at 2.4% and 2.6% respectively, broadly in line with recent averages. Outer ring vacancy, after spiking to 2.5% in October, has tightened back to 2.0% and is expected to fall further into the high 1% range. This is driven by owner occupier purchasers absorbing rental stock, many of them accessing the market through the 5% Deposit Scheme.

The rental bond data reinforces this. Total bonds held fell by 1% in Q3 2025, a net decrease of 5,314, marking the ninth consecutive quarterly decline with the exception of Q1. At 531,313 active bonds, the rental pool is now meaningfully below the June 2023 peak of 555,505.

Total Rental Bonds

The number of rental bonds held across Melbourne metropolitan areas continues to fall.

Change in Number of Rental Bonds Held - Melbourne Metro

■ ■ Quarterly Change in Number of Bonds Held (LHS) Rolling Annual Change (% RHS) Source:

Unit and Apartment Rents - Melbourne by Region

Rental growth appears to have plateaued in Melbourne’s unit markets, with affordability limits reached.

Median Rental Rates by Region

Comparison with Previous Periods

Unit and Apartment Rents - Melbourne by Region

Middle ring vacancy sits marginally above the inner ring but remains far tighter than the pre-2020 average of around 3%.

Median Rental by Product Type and Region

Greater Melbourne Dwelling Supply

Building Approvals - Greater Melbourne

Greater Melbourne saw 2,135 townhome dwellings approved in Q4 2025, slightly below the 2,344 recorded in Q3 but in line with both the same period a year prior and the three year quarterly average.

Only 2,339 apartments were approved in Q4 2025, down 20% on Q3 and 47% below the same quarter a year ago. Full year approvals of 11,066 apartments came in above the year to Q4 2024 but remain well below medium and long term averages.

The sentiment recovery visible in pricing and rental data appears to be flowing through to townhome development. Rate cuts have lifted buyer confidence, and developers are responding by commencing new townhome projects. Townhome approvals look to have found a floor and may improve modestly if late 2025 conditions hold into the new year.

Apartment approvals offer less cause for optimism. The sector appears to be in the contraction phase of a cycle that has characterised it since 2020, with medium term approvals on a clear downward trajectory. In the near term, developers are likely to be focused on launching and completing existing projects rather than initiating new ones, which should at least contribute to real net supply even as approvals remain soft.

There are, however, some reasons to look further ahead with more confidence. The Mid-Rise Code for 4 to 6 storey buildings significantly reduces planning risk through a streamlined, deemed to comply (DTC) assessment framework. This framework prioritises speed over yield, and may produce slightly lower dwelling density than the previous performance based on Clause 58 provisions. That said, the code represents a meaningful reform and should materially improve dwelling supply in well serviced middle ring locations over the medium term.

Apartment and Townhome Approvals - Q4 and Rolling Annual to Q4 2025

Apartments Q4 2025

2,339 dwellings

Apartments - Rolling Annual

11,066 dwellings

Townhomes Q4 2025

2,135 dwellings

8,944 dwellings -20% q/q and -47% y/y

Townhomes - Rolling Annual

Source: ABS Building Approvals

Building Approvals - Greater Melbourne

Both townhome and apartment approval progress have fallen from historic peaks.

Townhome Approvals Apartment Approvals

(RHS)

Medium and Higher Density

Construction Outlook

Construction Costs

Construction Pricing Movement

Construction input cost* escalation slowed slightly in Q4 2025, rising 0.5% over the quarter.

This is a step down from the 1.0% and 0.8% recorded in the two preceding quarters, but Melbourne still outpaced the national weighted average of 0.2% and sits well above Sydney and Brisbane at 0.1% and –0.3% respectively.

The main pressure points remain ceramics, cement products, and electrical equipment. Steel and plumbing are the only categories showing any meaningful price relief.

Output costs** rose 0.7% over the quarter and 2.8% over the year. Both figures sit below the national average, but output costs continue to outpace input costs. The gap reflects rising specialist labour costs, driven by competition from civil construction and a broader pickup in non-residential project activity.

Input Cost Escalation by Material - Melbourne

Installed Gas and Electrical Appliances

Plumbing Products Electrical Equipment

Cement Products Steel Products Other

Concrete, Cement, and Sand

Timber and Joinery Ceramics

Economic Outlook

Michael Staedler

General Manager

Research,

Data & Insights

m.staedler@rpmgrp.com.au

Renewed headwinds and heightened risks.

Late 2025 was showing promise. Easing rates had lifted sentiment, middle and outer ring unit markets were gaining ground, and first home buyer policies were having a tangible effect.

The inner ring remained quieter, with activity largely focused on completing existing projects while the market waited for feasibility conditions to improve for new medium and higher density developments.

Conditions shifted materially from February 2026. The RBA raised the cash rate in response to persistent domestic inflation, and escalating geopolitical tensions have since pushed energy costs higher and reinforced expectations of further rises.

Much of the monetary easing observed through 2025 is now expected to unwind, with policy settings back toward the restrictive levels of late 2023 and 2024.

Consumer sentiment has deteriorated, borrowing capacity has tightened, and the cost of capital for developers has risen. Demand and supply are both under pressure.

The more acute near term risk is energy and fuel costs. Rising oil and diesel prices are feeding directly into freight, manufacturing, and construction costs.

Cement, steel, bitumen, ceramics, plastics, and PVCs are all affected, and given how broadly these inputs are used across the sector, the pressure is expected to be widespread and persistent.

Medium and higher density residential will feel this most, particularly at the upper end where feasibility is most sensitive to cost escalation and rate movements. Policy support may continue to underpin lower price point segments, but overall demand is expected to soften. For developers, the near term points to elevated and volatile input costs, tighter funding conditions, and more complex feasibility, without the demand tailwinds of the post Covid period.

These same conditions tend to produce a more disciplined, supply-constrained market. Over the medium term, that should support price resilience and favour developers with strong balance sheets, efficient product offerings, and the capacity to respond to shifting buyer demand.

For more information, please visit: www.rpmgrp.com.au

Our Research Consultancy Services create bespoke reports crafted to your specifications, translating rich data into in-depth analysis. For a bespoke report, email the team at: contactus@rpmgrp.com.au