Meeting Victoria’s Infill Housing Challenge

Medium-density, family-friendly housing in established suburbs—what we often call the “Missing Middle”—is a crucial piece of the puzzle in the Federal Government’s Housing Accord target of “well located” housing.

House demolitions are an important source of land supply for the Missing Middle, providing land for infill development of medium density dwellings. Many demolitions will also be ‘knock downs’ where a single house is demolished to be replaced with another single house.

With house demolitions usually following the purchase by a developer, demolition permits have largely tracked the volume of sales since 2017 (when demolitions data was first collected by the ABS). Over the eight years to 2024, Melbourne has averaged 6,100 house demolitions per annum, ranging from a high of 7,395 in FY2022, to a low of 5,230 most recently in FY2024. The Middle Region has by far the highest level of demolition activity, accounting for around 70% of the Melbourne total.

Demolition activity in FY2024 is largely below the long term average in nearly all Established Melbourne LGAs, holding up best in Banyule, Boroondara and Whitehorse in the Middle Region and Greater Dandenong and Mornington Peninsula in the Outer Region. House demolitions are limited in the Inner Region but are well down in Stonnington and Melbourne, while holding up in Yarra and Port Phillip LGAs.

Around 10%, or one in ten, houses that are sold across Greater Melbourne end up being demolished, typically to be replaced by either a new house or a townhouse/apartment development. This has been relatively consistent over the past eight years. Significantly, demolitions in the Middle region are equivalent to around one in five (22%) house sales. However, while this percentage has been relatively stable over time, steadily reducing house sale volumes in the Middle region has meant that the supply of sites has also reduced.

As redevelopment of house sites continues, the detached housing stock in various areas will progressively decrease, reducing the availability of developable sites. This is already the case in pockets of many suburbs, where more than half of the existing housing stock has been redeveloped.

The optimal development yield that a demolished house site can achieve will vary in line with location, prices, site size and orientation, etc. The figure below shows the average number of house and townhouse approvals per demolition over the past five years. While some houses and townhouses will be built on other infill sites that haven’t involved a demolition, such as on rezoned industrial sites, the analysis nevertheless provides a useful indicator of yield on demolished dwellings.

Looking at the Middle and Outer Regions, where the majority of house demolition activity takes place, the number of replacement dwellings over the past five years has averaged 2.4 and 3.6 dwellings respectively per demolition. After subtracting the demolished house, the net increase in dwellings for each demolition is an average of only 1.4 and 2.6 dwellings respectively. The lower rate of replacement dwellings per demolition is likely to reflect a greater proportion of ‘one for one’ replacements, whereas the higher rate of replacement indicates more multi-dwelling townhouses being built on sites.

At the Local Government Area level, house and townhouse approvals have ranged from 1.4 dwellings per demolition in Boroondara, to 4.1 per demolition in Frankston.

Ultimately, achieving the government’s vision for more sustainable and compact urban growth will require a sharper policy focus on unlocking infill capacity in established areas. This includes reforming planning schemes to allow higher yields on appropriate sites, accelerating precinct-level rezonings, encouraging holistic development on aggregated sites, and incentivising a shift from “one for one” knock-downs toward higher-density, family-friendly housing formats.

Without these changes, the delivery of the Missing Middle—and with it, the success of Victoria’s infill housing strategy—will remain slow, fragmented, and far below what is required to meet future population and housing needs.

Quantify’s full report “Bridging the Infill Gap, Challenges to Realise the Potential in Melbourne’s Missing Middle” can be downloaded from our web site here.

For more information on how Quantify Strategic Insights can help you in relation to infill development, contact Angie Zigomanis at [email protected] or Rob Burgess at [email protected]