The pace of townhome approvals across Greater Melbourne remains subdued. In Q2 2025, just 2,293 townhomes were approved, only a modest lift from the 2,043 recorded in the previous quarter but still noticeably below last year’s figures.

This points to a stagnation in middle-ring townhome development, despite continued demand from buyers seeking alternatives to high rise apartments and detached homes.

Apartment approvals record sharp drop

Apartment approvals declined more sharply, with only 1,781 approved in Q2 2025. This is a 56% fall from the previous quarter and the second lowest quarterly figure since early 2023.

While year on year totals remain supported by stronger approvals between Q3 2024 and Q1 2025, the weak Q2 result signals a potential softening in the pipeline.

Market sentiment improves despite challenges

Developers continue to grapple with elevated delivery costs and lingering unsold stock. However, there are encouraging signs: financiers are showing greater willingness to support new supply, particularly with APRA easing presale requirements from 100% to 50-70%.

Combined with three interest rate cuts this year, these changes are improving project feasibility and supporting buyer confidence.

Why townhomes matter for a balanced pipeline

A more balanced housing pipeline will depend on stronger emphasis on townhomes. While inner-city high-rise projects continue to dominate activity, townhomes are better positioned to unlock supply in well connected, middle ring suburbs.

This housing type plays a critical role in addressing Victoria’s broader housing needs, bridging the gap between detached houses and high rise apartments.

This article references findings from our August 2025 Melbourne Metro Apartments & Townhomes Market Report. Read the full report here.