Townhouses and units are becoming important as buyers adjust their expectations around space, location and price.

Domain’s Matching Demand report compared buyer search budgets with advertised property prices. It found a mismatch between what purchasers could afford and detached house prices across many capital-city markets.

Medium-density housing was closely aligned with buyer budgets. Units showed the smallest difference between search prices and listings, while townhouses offered a middle ground between apartments and standalone homes.

Rate increases have reduced borrowing capacity by up to 8%, making that compromise more relevant. Many purchasers are willing to trade land for a better location, lower price and more usable space than an apartment provides.

Townhouses can appeal to first-home buyers, young families, downsizers and investors, giving well-designed projects a market. They may also allow people to remain close to employment, schools, transport and established services.

The findings reinforce the importance of Australia’s missing-middle housing. Detached houses and high-rise apartments cannot meet every household’s needs, particularly where land is scarce and expensive.

As planning systems encourage more medium-density development, townhouses are likely to play a larger role in improving housing choice. For buyers, they offer a realistic path to ownership without moving to fringe locations.