Melbourne’s medium density development sector continues to face entrenched challenges. Residual stock (completed but unsold dwellings) remains stubbornly high. Development costs are still eating into feasibility. These aren’t new issues. They’ve become part of the landscape, affecting projects from launch to post-completion.  

But we’re now seeing signs that conditions may begin to stabilise. 

Rent growth slows, giving renters some relief 

For renters, the pace of rent hikes is slowing. Migration remains elevated, and vacancy rates (especially in outer suburbs) are still tight. But unit rental growth is now tracking roughly in line with inflation. It’s a small but meaningful reprieve after months of sharp increases. 

Values reemerge for investors and buyers  

Melbourne’s relative affordability is becoming a clear advantage. Unit prices have dipped below Brisbane and are now comparable to Adelaide and Perth. That’s attracting investors. In Q4 2024, Victoria accounted for 31% of all new investment loans (11,278 loans).  

Interestingly, this comes amid a wave of investor exits, prompted by rising holding costs. Yet for every investor stepping out, another is stepping in – keen to capitalise on a market nearing its cyclical low.  

Rebalancing may unlock new supply  

Rising investor interest could help clear residual stock, lift pre-sales, and improve feasibilities: key ingredients for unlocking stalled supply pipelines.  

And the fundamentals are still working in the market’s favour. Migration is strong. Vacancy rates are low. Construction cost growth is moderating. We’re already seeing apartment approvals pick up, even as townhome activity stays quiet.  

The Reserve Bank of Australia (RBA) is expected to cut rates in response to global uncertainty. Lower interest rates will boost borrowing capacity and support affordability – especially for unit buyers.  

Challenges remain, but the market appears to be rebalancing. The path forward is narrow, but it’s becoming clearer.  

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