Melbourne is experiencing a surge in demand for family‑sized apartments, with larger units emerging as a key alternative for households priced out of detached homes near the CBD. The trend mirrors Sydney’s long‑established shift toward apartment living for families, highlighting changing preferences in Australia’s major cities.

New data from the Real Estate Institute of Victoria (REIV) shows that three‑bedroom units in Melbourne’s CBD have increased by more than $155,000, or 14.1 per cent, over the past year, reaching a median price of $1.255 million. This growth now places the cost of a three‑bedroom apartment above the combined value of two two‑bedroom units, which sit at around $565,000 each and have recorded no annual price uplift.

Developers have been responding to higher construction costs by prioritising larger apartments, often referred to as “sky homes”, which offer stronger financial returns than smaller one‑ and two‑bedroom products. According to REIV acting chief executive Jacob Caine, affordability pressures are driving families to consider spacious apartments closer to work, schools and amenities.

“With three-bedroom houses anywhere near Melbourne’s CBD now at a very significant price point,” Caine said, families are turning to apartments as a practical and accessible option. He added that three‑bedroom homes have “historically had typically been built to higher standards than those in more affordable price brackets, making them more appealing as well”.

Caine also noted a broader cultural shift as “the societal attitude towards families living in apartments are starting to shift.”

The preference for larger apartments extends beyond the CBD. Docklands recorded a $35,000 rise (3 per cent) in three‑bedroom unit prices, reaching a median of $1.185 million, despite smaller homes losing value. In Box Hill, three‑bedroom apartments climbed nearly $50,000 (5.7 per cent) to $883,000, while one‑ and two‑bedroom properties remained flat or declined.

Leonard Teplin, project management director at Marshall White, said most new buyers are downsizers from established suburbs seeking a home‑like layout in a premium location. “Most want a floorplan big enough for a three-bedroom layout with a study,” he said, noting that many luxury apartments now start at around $2 million in Melbourne’s eastern suburbs, with top‑end residences exceeding $5 million.

Teplin attributed the rising share of larger apartments to significant building cost increases since 2021. “It’s all come down to building costs, they have to be bigger and they have to sell for a bigger price,” he said. “You just can’t build them for less than $700,000 with the land and the build and all the taxes.”

Recent developments such as Malvern Gardens and Central Park Residences illustrate the trend, with three‑bedroom apartments making up around 95 per cent of stock and selling out prior to completion. These projects cater to families and downsizers through features like additional garage space, generous storage, high ceilings and personalised joinery.

The market shift has also delivered strong capital gains for early buyers. “The uplift has been quite phenomenal for those people who did buy over the last couple of years… It might be 20 or 30 per cent in some cases,” Teplin said.

Richard Temlett, national executive director of research at Charter Keck Cramer, noted that Melbourne is now aligning with Sydney, where families have long embraced apartment living in desirable school zones across the inner city and inner east.

The rise of family‑sized apartments underscores Melbourne’s evolving housing landscape, shaped by affordability challenges, construction economics and shifting lifestyle expectations. As demand strengthens, larger apartments are becoming a defining element of the city’s future residential market.

Source: Build Australia