The Demand Story Remains Intact

Interstate migration held strong through 2025, and Victoria recorded three consecutive quarters as a net intrastate migration destination. Long-term housing demand continued to build. For a state that has faced its share of affordability and supply pressures, these are important signals that underlying need for housing is not going away.

Purchasing Activity Lifted Sharply Into Year-End

Home purchasing activity picked up significantly in the final months of 2025. Recovering market sentiment played a part, but the federal 5% Deposit Scheme was a clear accelerant. Loan volumes across all buyer types reached a near five-year high, and investors returned to the Victorian market in meaningful numbers.

Melbourne’s middle and outer ring unit markets benefited noticeably, with a significant share of stock in those areas qualifying under the scheme. Unit price growth outpaced detached houses across Melbourne over Q4 2025, which is worth noting for anyone tracking value trends across the city.

Approvals Are a Mixed Picture

Townhome approvals have stabilised, but apartment approvals look to be sliding back into a downward trend. Developers have largely been focused on launching and completing existing projects rather than adding new ones to the pipeline.

The Mid-Rise Code, which streamlines approvals for 4 to 6 storey buildings, is a genuine reason for optimism here. It is expected to start showing up in approval numbers over the medium term, and it could make a real difference to the type of housing stock coming through.

2026 Has Brought Tougher Conditions

That optimism has since run into harder reality. Two interest rate rises since the start of 2026 have knocked consumer confidence, 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 feel the impact.

Want the Full Picture?

This article draws on findings from RPM Group’s VIC Apartments & Townhomes Market Report. Access the complete data and market forecasts in the full report.