Why Are So Many Townhomes Being Built?

If you’ve driven through Melbourne’s suburbs lately — from Bentleigh East to Glen Waverley — you’ve probably noticed a pattern. Sleek rows of modern townhouses are replacing older post-war homes with sprawling backyards. It’s not just happening in one pocket either; it’s unfolding across Victoria at a pace we haven’t seen in decades.

Over my 35 years in the construction game, I’ve watched this shift take shape. In the early ’90s, most clients dreamt of a big block and a standalone home. Fast-forward to today, and the same clients — or their adult kids — are asking for townhouses that balance comfort, location, and affordability. Land has become scarce, costs have climbed, and families are rethinking what “home” really needs to be.

Townhouses have stepped into that sweet spot between high-density apartments and detached houses. They offer space, privacy, and ownership without the price tag or upkeep of a full block. For builders, they’re a practical response to market pressures — a way to make projects stack up financially while meeting genuine housing demand.

The Economics Behind The Townhouse Boom

The townhouse surge isn’t happening by chance — it’s the product of sharp economics. Rising land prices, tighter lending, and the simple math of housing demand have pushed both buyers and developers toward smarter, denser solutions. Over the years, I’ve seen projects that wouldn’t have stacked up as single dwellings become financially sound when reworked into two or three townhouses. It’s a shift that’s transforming entire streetscapes across Melbourne.

Affordability Pressures Changing Buyer Behaviour

Let’s face it — the dream of the quarter-acre block has become out of reach for many. In suburbs like Bentleigh, Ormond, and Oakleigh, a standalone home can now easily top $1.3 million, while a brand-new townhouse on the same street might sell for $950,000. That $350,000 difference means the world to first-home buyers and young families who still want a piece of the suburb without sacrificing lifestyle or proximity to schools and transport.

Buyers are becoming pragmatic. Instead of holding out for the big block, they’re choosing something modern, manageable, and energy-efficient. For many, it’s a stepping stone — a way to enter the property market now and build equity for later. And in an environment where interest rates are unpredictable, affordability isn’t a preference; it’s a necessity.

From my own experience, when we launched a three-townhouse project in Bentleigh East in 2023, it drew over 200 enquiries in the first week. Two buyers were young couples who’d been renting in the area and couldn’t stretch to a detached home, and the third was a downsizer who wanted to stay close to family. All three saw townhouses as the middle ground between price, space, and convenience.

Developers Turning To Higher Density For Profitability

From a builder’s perspective, land economics drives everything. As land prices soar, the traditional single-dwelling model doesn’t make sense anymore. By developing multiple townhouses on a single block, builders can divide the land cost across several dwellings, effectively reducing the per-unit land cost and improving project viability.

For example, take a 650-square-metre block in Bentleigh East. Building one luxury home might return around $2 million in sales value. But subdivide the same site into three townhouses, and each might sell for $1.1 million — a total of $3.3 million. That’s an extra $1.3 million in gross sales, often with only a modest increase in build cost.

The approach doesn’t just boost profitability; it also helps address housing shortages by increasing supply in desirable, well-served areas. It’s what we call smart density — building up just enough to make economic sense without overwhelming existing streets.

Construction Efficiency And Scalability

Townhouses hit the sweet spot between speed and scale. Compared to large apartment complexes that can take three years to complete, most townhouse projects can be built within 12 to 18 months, depending on council timelines and weather. That shorter turnaround means developers can recycle capital faster and take on new projects sooner.

Here’s a quick comparison of build metrics across housing types:

Housing Type	Average Build Time	Approx. Cost per m²	Typical Project Scale	Return Profile
Detached Home	10–14 months	$2,200–$2,800	1 dwelling	Moderate
Duplex	12–16 months	$2,000–$2,500	2 dwellings	High
Townhouse	14–18 months	$1,900–$2,400	3–6 dwellings	Very High
Apartment Block	24–36 months	$2,500–$3,500	20+ dwellings	Variable

Beyond cost and time, construction efficiency comes from shared walls and repetitive design modules, which streamline both trades and materials. For example, plumbing stacks and framing layouts can be standardised across units, cutting waste and reducing build time.

Of course, the market isn’t without its challenges. Material costs and trade shortages have pushed up construction prices in recent years. But the townhouse model remains one of the most resilient segments because it balances scale with flexibility — it’s adaptable, profitable, and aligned with what both buyers and councils want.

Checklist: Why Townhouses Make Financial Sense

1. Land Efficiency: More dwellings per lot = lower per-unit land cost.
2. Faster Returns: Shorter build cycles mean quicker sales or rental income.
3. Broader Market Appeal: Townhouses attract first-home buyers, families, and downsizers alike.
4. Easier Approvals: Councils often favour medium-density infill over apartment blocks.
5. Predictable Construction: Repetitive layouts and modular design reduce build risk.

From a builder’s seat, I can say this: townhouses aren’t a passing trend — they’re a practical response to the realities of modern construction and urban growth. They let us deliver quality homes that work for the market, the land, and the local councils, trying to keep up with demand.

Policy Shifts And Planning Reform Driving Medium Density

If there’s one thing I’ve learned in construction, it’s that what happens in the council chambers can shape what gets built on the ground. Townhouses are booming not just because they make financial sense, but because planning systems across Australia — especially in Victoria and New South Wales — are starting to favour medium-density housing. Governments have realised that single-dwelling suburbs can’t keep up with population growth or affordability pressures, and zoning reform has become the lever to fix it.

“Missing Middle” Housing Becomes Mainstream

For decades, our housing choices sat at two extremes — detached houses or high-rise apartments. That gap in the middle is what planners now call the Missing Middle. Townhouses, duplexes, and small-scale developments fill that space, offering something dense enough to use land efficiently, but still human in scale.

In Melbourne, the Plan Melbourne 2050 strategy puts a clear emphasis on housing diversity, promoting townhouse and duplex construction in established suburbs with access to public transport, schools, and shops. The goal? To add density where the infrastructure already exists, rather than pushing growth into new fringe estates that strain roads and services.

I’ve seen this shift firsthand. Ten years ago, a two-unit project in a suburb like McKinnon would raise eyebrows from neighbours. Today, those same streets have entire rows of three and four-townhouse sites that blend neatly into the existing streetscape. Councils now prefer designs that respect neighbourhood character while making smarter use of land — and that’s exactly what well-designed townhouses achieve.

Zoning Reforms Opening New Opportunities

A major driver behind the townhouse boom is zoning flexibility. Across Victoria, Residential Zones (RZ1, RZ2, and RZ3) have been revised to allow multi-unit developments on standard suburban blocks, provided they meet setback, private open space, and overshadowing standards. In short, more homeowners can now legally redevelop their land into two or three dwellings.

Meanwhile, New South Wales has gone a step further. The Low and Mid-Rise Housing Policy, announced in 2024, opens the door for terraces and townhouses in what were once restricted R1 and R2 zones. The policy aims to deliver around 112,000 new medium-density homes in the next five years — a clear sign that the model works and governments are backing it.

Here’s a quick look at how these policy changes compare across states:

State	Key Policy	Effect on Townhouse Development	Estimated Additional Dwellings (2025–2030)
Victoria	Plan Melbourne 2050 / Medium Density Housing Code	Encourages townhouses and duplexes in established suburbs	~80,000
NSW	Low and Mid-Rise Housing Policy	Allows terraces and townhouses in R1/R2 zones	~112,000
Queensland	South East Queensland Regional Plan	Promotes medium-density infill near transport hubs	~60,000
WA	Perth and Peel @ 3.5 Million Plan	Focus on “urban infill corridors” for townhouse growth	~45,000

These policies aren’t just about increasing numbers — they’re about creating more liveable, compact communities. For developers, the takeaway is clear: councils and planning authorities are more open to townhouses than ever before.

Case Study: Bentleigh East And Glen Waverley

To see the impact of reform, look no further than Bentleigh East — a suburb that’s practically become a textbook example of gentle density. Once filled with weatherboard homes from the ’50s and ’60s, it’s now lined with two- and three-townhouse projects on lots averaging 600–700 square metres. The change didn’t happen overnight, but over a decade of incremental redevelopment supported by local planning guidelines.

We worked on a site in Bentleigh East back in 2018 — a tired three-bedroom home on a 640-square-metre block. Under the General Residential Zone 2 (GRZ2), we secured approval for three two-storey townhouses, each with three bedrooms, a small courtyard, and a double garage. The design respected the neighbourhood’s existing height and setbacks but delivered three homes where there had been one. The homes sold out before completion.

In Glen Waverley, similar infill projects are thriving. The Monash Council has been supportive of well-designed medium-density housing that fits into existing streetscapes. Builders who understand local overlays — especially regarding vegetation, height limits, and overshadowing — can achieve approvals faster and deliver projects that enhance, rather than disrupt, the area.

The Bigger Picture

What’s driving these reforms is simple: housing affordability and urban growth. Melbourne’s population is projected to hit 6.5 million by 2030, and councils are under pressure to find ways to house people closer to jobs and infrastructure. Townhouses are the practical compromise — denser than detached homes but without the visual bulk of high-rises.

In short, policy has caught up with reality. Governments are recognising what builders have known for years — that townhouse development isn’t just profitable, it’s sustainable, efficient, and essential for keeping Australian cities liveable.

Changing Demographics And Lifestyle Preferences

If you really want to understand why townhouses are taking off, look beyond the financials and the planning codes — look at the people buying them. Over the past decade, I’ve watched clients’ priorities shift. Where once the conversation revolved around block size and backyards, now it’s about lifestyle, walkability, and long-term maintenance. Townhouses suit the way Australians actually live today, not how we used to.

Modern Buyers Value Lifestyle And Low Maintenance

The traditional Australian home once came with a half-acre backyard and a lawnmower that ran every Sunday. These days, most people would rather spend their weekends at the café or watching the kids play sports than pulling weeds. Townhouses strike that balance beautifully — offering enough space to live comfortably without the hassle of a large garden.

Many of our clients in areas like Carnegie, Mordialloc, and Cheltenham tell us they’re done with “yard work fatigue.” They want a private courtyard for entertaining and maybe a small veggie patch, but nothing that eats up their time. Homeowners Associations (or Owners Corporations, as we call them in Victoria) often handle landscaping and shared driveways, so residents can lock up and leave without worry.

As a builder, I’ve noticed that smaller outdoor areas don’t dampen demand — they actually increase it. Buyers see value in simplicity. The reduced upkeep also means lower long-term costs, which appeals to everyone from young professionals to retirees.

The Rise Of The Lock-And-Leave Lifestyle

Downsizers are one of the fastest-growing buyer groups for townhouses. These are people who’ve raised families in big homes but no longer want the maintenance or the stairs that come with them. They’re looking for homes that are still spacious and modern, but easier to manage — something they can “lock and leave” when they travel.

Take a couple I worked with in Brighton East. After 40 years in a double-storey family home, they sold and moved into a newly built townhouse nearby. We designed their new place with wider doorways, no steps at entry, and a lift to access the upper floor. It’s built for ageing in place, but it still feels like a premium residence — bright, modern, and secure.

That type of practical design is becoming standard in townhouse developments. Builders who think ahead and include accessibility features early on are seeing stronger sales among downsizers. For older buyers, it’s not just about space — it’s about staying close to their community, their family, and the lifestyle they’ve built over decades.

Walkability And Urban Connectivity

Another key factor driving the shift toward townhouses is location. Australians want to live closer to the action — shops, schools, medical centres, and public transport. The old model of driving 40 minutes to work and another 20 to get groceries doesn’t appeal to younger generations, or to retirees who’ve had enough of traffic.

That’s why many new townhouse developments cluster around activity centres and transport corridors. Suburbs like Brunswick, Box Hill, and Moorabbin are good examples — they’re well-connected, with cafés, rail stations, and community facilities within a short stroll. For first-home buyers, that’s gold. They can ditch one car, save on fuel, and enjoy the lifestyle perks of an inner or middle-ring suburb without paying apartment premiums.

I often tell clients: “It’s not just about square metres — it’s about minutes.” Being able to walk to work, school, or your favourite bakery adds more value to daily life than a patch of grass you never use. Townhouses deliver that freedom.

Architectural And Design Evolution

The image of a “row house” has changed dramatically. Today’s townhouses are architectural statements — far from the cookie-cutter designs of the past. Modern builds feature open-plan living, large windows, high ceilings, and smart storage solutions. Many come with rooftop terraces, solar systems, EV chargers, and energy-efficient insulation that meet or exceed 7-Star NatHERS standards.

At MJS Construction Group, we’ve seen demand grow for adaptable layouts — spaces that can double as a home office, guest suite, or media room. Buyers want flexibility. A well-designed townhouse now feels more like a standalone home, just with a smaller footprint.

Here’s a quick snapshot of how townhouse design has evolved:

Feature	Older Townhouses (Pre-2010)	Modern Townhouses (2020s)
Floor Plan	Narrow, segmented rooms	Open-concept, light-filled spaces
Energy Rating	4–5 Star average	7-Star minimum under 2024 NCC
Soundproofing	Basic separation walls	Advanced acoustic insulation
Sustainability	Limited focus	Solar panels, rainwater reuse
Car Parking	Rear laneway	Integrated garages & EV-ready

Modern construction methods have also resolved one of the biggest historical complaints — noise. Advances in acoustic insulation and wall framing have made shared walls far quieter. Buyers who once worried about hearing the neighbour’s TV now enjoy the same peace as in a detached home.

Generational Shifts And Family Dynamics

Townhouses aren’t just for singles or downsizers. They’re increasingly becoming the go-to option for smaller families. With average household sizes dropping, many parents are happy to trade yard size for better locations near schools and transport.

Millennial and Gen Z buyers, in particular, see townhouses as a smart stepping stone. They get multiple bedrooms, private space, and land ownership — something apartments often can’t offer. And with flexible working arrangements, many prefer to stay close to urban centres where co-working spaces, childcare, and cafes are nearby.

In other words, townhouses are catching up with how Australians actually live: smaller households, busier lives, and greater emphasis on location and lifestyle over excess space.

Why Developers Choose Townhouses Over Apartments Or Detached Homes

When you’ve been building in Melbourne as long as I have, you learn that the smartest developers aren’t chasing trends — they’re following feasibility. Townhouses strike that rare balance between risk and reward. They’re easier to finance than large apartment projects and more profitable than single-dwelling builds. For developers, that combination is gold.

Townhouses make financial, practical, and regulatory sense. They deliver solid returns without the red tape or delays that can drag out bigger projects. Plus, councils and buyers are aligned in their demand for them — a rare thing in property.

Balanced Risk And Return

Every project starts with a spreadsheet — what you spend, what you make, and how long it takes. Townhouses tick all three boxes in a way that few other housing types can.

Compared to multi-storey apartments, they require smaller capital outlay and less exposure to pre-sales risk. Builders can stage construction, finishing and selling one block of units while work continues on the next. This staggered approach means quicker cash flow and better liquidity throughout the project cycle.

Here’s what the comparison often looks like in practice:

Project Type	Typical Project Duration	Finance Risk	Pre-Sales Requirement	Market Flexibility
Detached Home	10–14 months	Low	None	Narrow market
Townhouse Development	14–18 months	Moderate	Low to medium	Wide buyer appeal
Apartment Complex	24–36 months	High	High	Narrow (investor-focused)

Developers also appreciate the predictability of townhouse builds. There’s less reliance on complex engineering, fewer planning disputes, and more control over timelines. You can repeat proven designs and construction methods across multiple sites — a big advantage in a market where delays can cost thousands per week.

One developer I worked with in Clayton recently converted a 700 m² block into four double-storey townhouses. The entire build was wrapped in 16 months. The profit margin came in at around 20%, compared to the 8–10% he was seeing on detached home builds. He’s now scouting for two more similar sites.

Meeting Market Demand While Preserving Streetscape

Townhouses aren’t just profitable — they also fit neatly into existing neighbourhoods. That’s one reason councils prefer them over apartment blocks. They maintain a human scale, use familiar materials like brick and timber, and can be designed to reflect local character.

In suburbs like Moorabbin, Glen Iris, and Caulfield South, councils have been pushing for what they call “gentle density.” Instead of towers that change the skyline, townhouses add homes that blend in — usually capped at two storeys, with setbacks and landscaping that mirror surrounding homes.

When we submitted a project in Bentleigh in 2022, the original owner considered proposing a four-storey apartment block. After pre-application discussions with Glen Eira Council, it was clear that the project would face strong resistance. We reworked it into three double-storey townhouses with pitched roofs and natural brick façades. The revised design sailed through planning in under four months — a fraction of the time an apartment application would have taken.

This approach doesn’t just keep neighbours happy; it creates developments that age well. Buyers want homes that feel part of the community, not dropped in from nowhere. Townhouses achieve that balance by offering modern living behind familiar façades.

A Developer’s Checklist: Why Townhouses Win

For builders and developers considering their next project, here’s a quick decision checklist drawn from real-world experience:

1. Land Use Efficiency: Maximise site yield without breaching height or density restrictions.
2. Market Versatility: Appeal to first-home buyers, families, and downsizers — not just investors.
3. Lower Entry Costs: Smaller projects mean less upfront capital and easier finance approval.
4. Shorter Turnaround: Faster construction equals quicker returns and less market exposure.
5. Council Support: Local planning policies increasingly favour medium-density infill.
6. Design Flexibility: Standardised designs can be adjusted for varying lot shapes and slopes.
7. Sustainability Compliance: Easier to achieve 7-Star energy ratings than large apartment blocks.

Example: From Single Dwelling To Multi-Unit Success

Not long ago, we worked on a redevelopment in Ormond where a single weatherboard home sat on 680 square metres of land. The owner wanted to “do something with it” but wasn’t sure what made sense. After a feasibility study, we proposed three townhouses — two with three bedrooms and one with two bedrooms — all with double garages and landscaped courtyards.

From planning to handover, the project took 17 months. Each townhouse sold within six weeks of completion, generating a combined return nearly double the original home’s value. The owner, who initially planned to sell the land, ended up keeping one townhouse as an investment property. It’s now rented to a local family at $850 a week.

That’s the power of smart density: using one site to create multiple homes, more opportunities, and long-term financial security.

Why Townhouses Are Here To Stay

The townhouse model is future-proof. It aligns with housing policy, meets consumer demand, and allows developers to deliver quality homes at scale without overcapitalising. As affordability pressures continue and land supply tightens, this middle ground — neither sprawling nor sky-high — will define Australia’s next decade of residential construction.

The surge in townhouse construction isn’t a coincidence — it’s a reflection of where Melbourne’s housing market, planning system, and buyer priorities have all converged. Townhouses have become the logical response to rising land costs, changing lifestyles, and government pressure to increase density within established suburbs. They offer a sensible compromise: compact yet comfortable, efficient yet appealing, affordable yet enduring.

From a builder’s perspective, the shift makes perfect sense. Townhouses allow us to deliver quality homes that meet the needs of modern families, downsizers, and investors while preserving the character of Melbourne’s neighbourhoods. They represent a smarter, more balanced approach to housing — one that blends financial feasibility, sustainability, and livability in a single design. As the city continues to grow, townhouses will remain at the forefront of how we build communities that work for everyone.