Townhomes are fast becoming a key driver in Melbourne’s greenfield housing market, as affordability shifts and buyer priorities realign. The convergence of interstate investor interest, new affordability windows for owner occupiers, and builder appetite for secure pipelines is placing townhomes at the centre of multiple tightening forces.

Interstate investors shift focus back to Melbourne 

Interstate investors who once favoured Adelaide, Perth, and Brisbane are increasingly turning to Melbourne, where the all dwelling median price sits at $803,000. This compares to $840,000 in Adelaide, $831,000 in Perth, and $934,000 in Brisbane.

The price gap is attracting investor capital back into Victoria, particularly from those operating within defined borrowing limits. With the average investor loan nationally at around $673,000, and assuming a 5% deposit, budgets typically fall under $700,000.

The budget aligns with many medium density offerings in greenfield estates. A typical package might include a 150sqm lot priced between $200,000-$250,000 and a townhouse build of around $380,000 – delivering a complete turnkey package at $580,000-$630,000.

Owner occupier demand rising with interest rate cuts 

Townhome demand extends well beyond investors. The recent interest rate cuts are reshaping owner occupier demand.

For dual income first home buyers earning between $100,000-$110,000, the August interest rate cut (and a potential further cut in November 2025) could lift purchasing capacity into the $590,000-$622,000 range. This places greenfield townhomes newly within reach.

Previously sidelined segments such as single parents and budget conscious second home buyers are also beginning to reemerge as affordability improves. Even modest borrowing capacity increases can add tens of thousands of dollars in buying power, nudging more households back into the townhome market.

Builders secure supply ahead of a full market recovery 

Builders are moving early to secure small lots and medium density stock, maintaining supply pipelines well before retail sentiment and activity have fully returned across the broader housing market.

This proactive approach highlights confidence in the long term demand trajectory for townhomes, and positions builders to capture demand as it accelerates through 2025 and beyond.

Developers rebalance product mix to meet evolving demand 

The intersection of investors, first home buyers, single parents, and second home buyers is set to place sustained pressure on townhome supply over the near term. In response, developers across Melbourne’s greenfield sectors are reviewing land use strategies, rebalancing product mix, and securing planning flexibility.

By the end of 2025, townhomes are increasingly likely to emerge as a strategic response to Melbourne’s affordability challenges and demand inflection point.

This article references findings from our Q2 2025 Victorian Greenfield Market Report. Read the full report here.