Melbourne’s central business district has a gap between homes needed and homes coming.
The City of Melbourne estimates that 21,600 additional dwellings will be required by 2028. The current apartment pipeline holds just 8,900 new units, which leaves supply 60% short. Property investors weighing the city’s apartment market have reason to look closely at that figure.
The analysis comes from a report titled ‘Melbourne CBD Market Outlook 2025.’ Far East Consortium, one of Australia’s most respected Melbourne property developers, commissioned the research from Urbis. The company wanted a clearer picture of how the city’s property market works, what shapes buyer behavior, and where the economy is heading in 2025 and beyond. Melbourne CBD remains one of the most attractive property markets in the country, backed by a growing population, major infrastructure projects, and strong rental demand. Understanding why its apartments have proven so resilient as an asset class is central to navigating that market.
Population is the first driver. Melbourne is projected to overtake Sydney as Australia’s largest city by 2032, and its population is forecast to reach 7.45 million by 2040. The city has posted strong growth throughout the past decade, powered largely by Immigration. In 2024 alone, 446,000 new overseas arrivals came to Melbourne, adding to the pressure on housing.
One analyst, who says he has spent a decade studying property cycles, tells clients that scarcity of supply is the foundation of long-term capital appreciation. When demand outruns supply by a margin this wide, he says, urban real estate tends to command premium valuations.
Public spending is the second pillar. Several major projects are reinforcing Melbourne’s livability and its pull for investors. The Melbourne Greenline, due in 2025, is a $224 million project to transform public spaces along the Yarra River. It will create a 4-kilometer route with more recreation and event opportunities. The West Gate Tunnel Project, also due in 2025, is a major road upgrade that offers an alternative to the West Gate Bridge. It is meant to ease congestion and Improve links between Melbourne’s west and the CBD. The North East Link, scheduled for 2028, is the largest road project in Victoria. It will join key arterial roads in the city’s north and east, cutting travel times and supporting urban growth across that region. The Queen Victoria Market Renewal, slated for 2029, is a $268 million revitalization of the city’s iconic market. It will add public spaces, restaurants, and activities to draw both residents and visitors. Finally, the Suburban Rail Loop, set for 2035, will connect key suburbs and shorten commutes. It is expected to lift housing demand near transport hubs such as Clayton and Sunshine.
All of these sit within Victoria’s $107 billion infrastructure plan, which raises Melbourne’s global profile and drives long-term growth in property values. The same analyst says that, in his experience, values rise faster in corridors directly touched by government capital expenditure.
The third factor is the apartments themselves. Price is a large part of their appeal, and it is one of the advantages of buying an apartment over land. In 2024, the median price of a Melbourne CBD apartment was 56% lower than that of a detached house, which put apartments within reach of more buyers.
Rents tell a similar story. Median weekly rent in the CBD climbed to $750 in November 2024, compared with $690 in 2023. That is a 9% increase year on year. The vacancy rate averaged just 2.4% during 2024, and newly built CBD apartments achieved gross rental yields of 4.8%.
New development sites within the CBD grid are becoming harder to find. Existing apartments are therefore likely to see significant capital appreciation. The ‘Melbourne CBD Market Outlook 2025’ report states that “constraints on new supply should lead to growth in capital values as demand continues to outpace supply”.
The broader economy supports all of this. Australia’s economic fundamentals underpin the Melbourne market. As of late 2024, unemployment stood at 4.0%, well under the 10-year average of 5.3%. Consumer confidence has recovered as well. The ANZ-Roy Morgan Index gained 12 points year on year to reach 86.4 in December 2024. Inflation fell to 2.8% in September 2024. Together, these trends have produced a favorable climate for property investment.
Interest rates may help further. Major banks, including ANZ and NAB, forecast rate cuts that should lower borrowing costs and stimulate activity in the property market. The Reserve Bank of Australia’s cash rate is expected to fall to between 3.35% and 3.85% by December 2025, which would Improve affordability for investors seeking to secure a Melbourne CBD apartment.
Location matters as much as any of these figures. Buyers in Melbourne have many factors to weigh, and choosing the right location is among the most critical. Rapid population growth, transformative infrastructure, and strong rental performance combine to make the CBD an exceptional investment opportunity, and the scarcity of new development within the grid only strengthens the case for existing apartments.
In short, a 60% supply shortfall, a rising population, heavy public investment, and firm rents all point the same way for Melbourne CBD apartments. Whether that gap closes or widens will shape the city’s property market for years.
If you want to keep up with the latest news and analysis, hit the subscribe button so you don’t miss the next video. Give this one a like if you found it useful, and turn on the notification bell so new episodes reach you the moment they go live.”
