Buyers across Australia’s major cities are turning to medium-density dwellings such as terraced homes, townhomes and small-block apartments to stay in sought-after suburbs without stretching budgets.

Demand Shifts Toward Medium-Density Homes

Domain’s chief residential economist Dr Nicola Powell says many people are staying put in their favourite locations rather than moving to the fringe, opting for alternative housing types instead. Powell adds that the limited supply of traditional detached houses is prompting couples, young families and downsizers to explore these more compact options.

She points out that terraced homes and townhomes are especially scarce in middle-ring suburbs, keeping demand high among couples, young families and downsizers.

Pricing Gaps Highlight Savings

The latest Matching Demand Report shows that swapping a detached house for a townhome can save more than relocating 20 kilometres outward from a central business district.

In Sydney, buyers looking for inner-city houses have budgets $400,000 below asking prices, while those searching for townhomes are willing to pay $100,000 above the limited supply.

Melbourne data reveal average budgets sit $150,000 below townhome prices, contrasted with a $440,000 shortfall for comparable houses.

Developers Respond to Buyer Preferences

Solano cautions that older buildings may need remedial work, recommending proactive maintenance and avoidance of sites slated for a construction boom. He advises purchasers to conduct thorough inspections and to factor future repair costs into their budgeting process.