Victoria’s apartment market is expected to experience a notable recovery by 2026, after the final months of 2025 showed strong performance in the sector, outpacing house price growth in many parts of the state.
Data from the Real Estate Institute of Victoria indicates that the median price of apartments in Melbourne rose by 2% between October and December 2025, reaching $656,500. By comparison, house prices increased by 1.8% over the same period. In regional Victoria, apartment prices jumped by 5%, with the typical unit price reaching about $461,000 by the end of the year, while house prices rose by 1.2%.
In terms of market performance, apartments outperformed houses in Melbourne’s inner and middle-ring suburbs but lagged behind them in the outer suburbs. Among the areas recording the largest increases was Murrumbeena, where apartment prices more than doubled, rising by over 50% to $632,500. Abbotsford followed with a 34.1% increase, lifting the median unit price there to $657,000.
REIV chief executive Toby Balaz attributed this strong apartment performance to affordability becoming a more critical issue for buyers. He said the growing demand for medium-density housing reflects an important shift toward greater acceptance of apartment living, adding that the trend is likely to continue as buyers increasingly recognize their value and economic suitability.
Despite some investor activity, Balaz noted that a large proportion of buyers are young people and first-home buyers, although he pointed out that investors in the state remain concerned about the costs associated with managing such properties.
Meanwhile, buyer’s agent Nicole Jacobs said she was not surprised by the strong performance of affordable properties, including apartments, but advised buyers to proceed carefully and make well-considered decisions when purchasing real estate.
She particularly recommended that those seeking long-term stability and lower costs look to larger, older apartments and consider areas surrounding fast-growing suburbs to secure better value without paying high premiums. She encouraged exploring locations adjacent to booming suburbs such as Ormond or Cheltenham, rather than focusing on high-priced areas like Hampton.
This momentum in the apartment market could support the objectives of the Victorian government, which is seeking to increase housing supply within established suburbs. Mr Balaz noted that rising prices for existing apartments help narrow the gap with the cost of building new developments, providing a positive boost for developers.
He added that there is growing acceptance of living in the city and nearby areas, giving developers greater confidence to focus on medium-density housing in the coming phase.
However, Jack Vaughan, policy director at the Urban Development Institute of Australia – Victoria, said that rising prices alone are not enough to sustainably stimulate the sector. He noted that the industry faces major challenges that require government reform of tax systems and reductions in the cost of developing new projects to make them more viable and to meet the growing demand for affordable housing.
