Is 2026 the Year Melbourne Units Finally Outperform Houses?

Melbourne's unit market has undergone a sharp reversal in late 2025, with apartments in established inner and middle-ring suburbs recording quarterly price growth that now exceeds detached houses in many series (for example, Domain’s December 2025 House Price Report and the REIV’s quarterly results). Dozens of metro suburbs recorded double-digit quarterly growth in median unit prices, with outliers like Murrumbeena highlighted as a standout in REIV commentary (REIV: “Melbourne unit market strengthens as prices increase”). For the first time in years, older-style apartments in small blocks—particularly two-bedroom units built in the 1970s–1990s with manageable owners' corporation fees—are seeing renewed demand and faster repricing in quality pockets, signalling a possible inflection point in Melbourne's traditionally house-dominated market.

Why Units Are Suddenly Competitive in 2026

Three forces converged in 2025. First, the median Melbourne house price crossed $1.1 million (Domain’s December 2025 House Price Report), placing detached homes out of reach for most single-income buyers and many dual-income households earning under $180,000 combined. Second, the Reserve Bank of Australia held the cash rate at 4.10% (e.g., RBA April 2025 decision)—even as it later eased through 2025 to 3.60% by December (RBA cash rate target history)—keeping serviceability tight under APRA’s focus on high DTI lending (APRA’s DTI limit for residential mortgage lending) and the ongoing 3% serviceability buffer (APRA: serviceability buffer remains at 3 percentage points). Third, Victorian stamp duty thresholds were unchanged, meaning a $950,000 unit attracts $51,070 in duty versus $78,070 on a $1.2 million house—a $27,000 saving that funds deposit gaps or renovation buffers [under the State Revenue Office’s general rates, duty is ~$52,070 on $950,000 and ~$66,000 on $1.2 million: see Victorian land transfer duty general rates].

At the same time, Melbourne's chronic undersupply of well-located, livable apartments created scarcity in the sub-$800,000 bracket. Buyers discovered that a renovated two-bedroom unit in Abbotsford or a 1980s villa unit in Moonee Ponds offered walkable amenity, proximity to employment hubs, and entry prices well below equivalent-location houses.

What Defines a "Good" Unit in the Current Market

Not all apartments are benefiting equally. High-rise towers built after 2010, especially those with cladding remediation liabilities, remain sluggish (see Victoria’s guidance on combustible cladding and rectification). Conversely, older-style apartments in small blocks of six to twelve units—common in Box Hill, Hampton and parts of Murrumbeena—are seeing the strongest demand. These buildings typically feature:

• Larger internal areas (often meaningfully more liveable than many newer layouts)
• Brick or rendered construction with lower defect risk
• Established owners' corporations with transparent financials and levy histories
• Ground-level or low-rise configuration, avoiding the stigma and insurance complexity of high-density towers

Buyers are also scrutinising strata records more carefully. In Victoria, sellers must include an owners corporation certificate and accompanying documents in the Section 32 (vendor) statement (Consumer Affairs Victoria: owners corporation certificate + Section 32, and Sale of Land Act disclosure context), and potential buyers have inspection rights over owners corporation registers and records (Consumer Affairs Victoria: access to records).

Rentvesting with Melbourne Apartments: A Viable First-Property Strategy

For first-home buyers priced out of their preferred suburbs, rentvesting—buying an investment property while renting where you want to live—has become pragmatic rather than aspirational (definition and examples: NAB on rentvesting). An inner-ring unit purchased for $650,000–$750,000 can yield $2,300–$2,600 per month in rent, delivering gross yields of 4.0–4.5% (see metro Melbourne unit rent and yield benchmarks in REIV Victorian Insights). Under Victoria's current land tax settings, investors with total landholdings under $300,000 in unimproved value pay no land tax; above that threshold, rates start at 0.2% and scale progressively [land tax generally applies based on total taxable site value (land value), with rates and thresholds set annually: see SRO: land tax and SRO: site values and land tax].

The trade-off is capital growth expectations. While outer-growth corridors like Clyde North or Wollert may offer detached houses at similar entry prices, their timelines can be more sensitive to infrastructure delivery and local supply pipelines. Inner-ring units, by contrast, benefit from established transport and employment nodes and tend to see tighter rental markets during periods of demand pressure (for current vacancy context, see REIV rental snapshot).

How Buyer Advocates Navigate the Unit Market in 2026

Specialists who focus on medium-density stock provide subscribers with curated shortlists of suburbs where unit fundamentals are strong: solid owners' corporations, low-rise construction, and price points under $850,000. For first-home buyers, this includes mapping realistic pathways such as "inner-ring unit now, outer-ring house in five years" versus stretching into a growth-corridor house today, factoring stamp duty (SRO duty rates), mortgage serviceability settings (APRA’s DTI limit framework and serviceability buffer), and suburb-specific supply pipelines.

Investors also compare after-tax cashflow realities, including depreciation rules: older units may have limited deductions for second-hand plant and equipment (in many cases no deduction after 1 July 2017: ATO – second-hand depreciating assets), while capital works deductions (where eligible) run over 40 years at 2.5% per annum (ATO – capital works deductions). Tenancy risk is also assessed against Victoria’s evolving rental compliance landscape (minimum standards and related obligations: Tenants Victoria – minimum standards).

The Risk of Buying Units Too Late or Too Early

Timing concerns are valid. If 2026 marks the start of a multi-year unit cycle, early entrants in quality pockets may capture strong appreciation over the next few years. Conversely, buyers who chase headline growth in suburbs with weak fundamentals—high-rise precincts with oversupply, or fringe-area townhouses marketed as "apartments"—risk flat or negative returns if interest rates remain elevated or migration slows.

The safest approach remains asset-specific due diligence: inspect the building, review owners corporation financials and certificates (Consumer Affairs Victoria: records + OC certificate), check planning overlays for future high-density rezoning that could flood supply (using VicPlan to view zones and overlays), and model cashflow under pessimistic scenarios (vacancy, rate moves, unexpected maintenance). Melbourne's unit market is not homogenous; a well-chosen apartment in an established suburb can outperform a poorly located house, but only if the buyer understands what they are buying and why.

Forge Real Estate Melbourne can help you blueprint your future by finding the perfect blue-chip property where your lifestyle needs and investment goals converge.

📞 Phone: (03) 91003633

✉️ Email: info@forgeproperty.com.au

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