Melbourne’s Modern Era: Why Units Are Overtaking Houses in the Real Estate Market

Trends in the Melbourne real estate market are shifting, with residential units gaining traction over traditional houses. The investment landscape has moved from houses, historically seen as a stable investment, to units leading the way. Recent data shows a significant rise in interest and demand for residential units, especially in Melbourne’s bustling real estate market. Here’s a closer look at the key causes behind this shift and the latest developments in Melbourne’s property scene.

REIV Residential Market Index (RMX) Overview

The Residential Market Index (RMX) is an index established by the Real Estate Institute of Victoria (REIV), offering comprehensive insights into property price movements. This index tracks changes in residential property prices and provides valuable data on both houses and units. Additionally, the REIV uses other indices focusing on all residential properties, houses, and apartments to better understand market dynamics and consumer preferences.

Increase in Melbourne’s Unit Development

The REIV Unit Index experienced the largest growth at the start of the year. In May, the index saw a 3.0% increase, reaching its highest value since 2017. This marked a significant 23.6% rise from February, indicating growing demand for modern properties in prime locations. The median price of a three-bedroom apartment in popular areas has climbed to $855,500, which is $45,000 more than the price of a three-bedroom house.

Comparing Houses and Units

Despite rising prices per unit, demand for inner Melbourne residences remains strong. The median value for houses is $1,520,000, while apartments have a median price of $1,135,000, showing a difference of 25.4%. However, the overall trend indicates a narrowing gap in prices between houses and units, especially in middle and outer suburbs, as well as in regional Victoria.

Factors Driving Changing Preferences

  1. Affordability: Units generally have lower prices than houses, which appeals to first-time buyers and investors looking to enter the real estate market.
  2. Convenience and Lifestyle: The growing popularity of urban living is driving up demand for units in well-connected areas. People prioritise having immediate access to workplaces, educational facilities, and natural surroundings.
  3. Investment Potential: Units offer strong investment potential due to increasing interest and narrowing price differences between houses and units.
The shift towards apartment living is reshaping Melbourne’s housing market. While houses remain popular in inner regions, units are gaining favour in central, outer regions, and surrounding areas. This shift reflects consumers’ desires for convenience, flexibility, and proximity. For buyers and developers, units represent a strong investment opportunity in the current market.
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