In Melbourne, developers can turn one old house into a multi-dwelling development by buying the right block at the right price, getting council approval and building homes that appeal to buyers. Replacing a tired house with two, three or four townhouses is a form of property development that can add value even in a quiet market.
Key Takeaways
- Older, run-down houses on big blocks are among the biggest casualties of Melbourne’s current market.
- A wide frontage, General Residential Zone (GRZ) zoning and a flat block make an old house more suitable for townhouses.
- Council will look closely at privacy, sunlight for neighbouring houses and open space for each new dwelling.
- Older downsizers who want to stay in their local area are looking for modern, low-maintenance luxury.
- Prices are expected to stay fairly steady before growing again in late 2027 or 2028.
Why Consider Turning One Old House Into Several Townhouses Right Now?
One of the best ways to make real money in property is not just buying a house and hoping the market goes up, it’s finding a way to multiply its value yourself.
Today there is no shortage of negative headlines about the Melbourne property market. Prices have dipped, and there are 18.2 per cent more homes on the market than this time last year. Buyers are nervous, and properties are sitting around waiting for offers.
Some of the biggest casualties right now are older, run-down houses sitting on big blocks of land. Regular families don’t want them because fixing them up is too expensive.
This can present a golden opportunity. By knocking down one tired old house and replacing it with two, three, or four modern townhouses (a strategy called multi-dwelling development), you can manufacture your own profit, even in a quiet market.
What Should You Look for in an Old House to Redevelop?
The secret to a successful project is buying the right piece of land at the right price. Because regular buyers are avoiding fixer-uppers right now, sellers of old houses are becoming much more realistic about price.
- When looking for a property for a multi-dwelling development, seek out houses with a wide frontage that can accommodate enough width space for townhouses that will be side-by-side, giving each buyer their own front yard and driveway.
- You’ll also need to be searching within the right council zoning. Look for properties in the General Residential Zone (GRZ) which basically means the neighbourhood welcomes townhouses and units.
- Finally, a flat block of land is your best friend because it means you will avoid spending a fortune on retaining walls and drainage before you even start building.
What Does Council Look at When You Build Multiple Homes on One Block?
Once you buy the house, you need to get permission from the local council to build multiple homes on the block. In Victoria, these rules are called ResCode.
To get your plans approved without a headache, your design needs to be neighbour-friendly.
Council will look closely at whether your design breaches privacy and has your new dwellings looking directly into other people’s backyards, whether your new building blocks the sun from neighbouring houses, and whether each new dwelling has enough open space as part of the design.
What Do Buyers Want From New Townhouses?
The days of building cheap, boring brick units are over. Older downsizers who want to stay in their local area are looking for modern, low-maintenance luxury.
To get top dollar when you sell, your new property will need to boast smart layouts that include a ground floor master bedroom, street appeal so the dwelling looks attractive from the street, and be ready to move in right away with all finishings fully completed.
Is Now the Right Time for Developers to Build?
With the Melbourne market currently in a quiet, bottoming phase, prices are expected to stay fairly steady before growing again in late 2027 or 2028.
This allows developers to find an old house at a bottomed-out price, get council permits and build a townhouse development in its place in time for a potential market recovery when it is time to sell the new dwellings.
It could be that Melbourne is offering the best buying conditions for multi-dwelling property developers that we’ve seen in years.
Funding a Multi-Dwelling Development in Melbourne
Perry Finance’s Melbourne-based brokers arrange finance for residential projects, from small-to-medium developments through to multi-million-dollar developments.
To discuss funding for your next project, contact Perry Finance today.
