A city on track to become Australia’s largest, with a pipeline of new apartments covering only a fraction of what it needs: that is the picture painted by the “Melbourne CBD Market Outlook 2025,” a report prepared by Urbis.
Far East Consortium, one of Australia’s most respected Melbourne property developers, commissioned the research to better understand how the city’s property market works. The findings examine what shapes purchasing behavior, where the structural housing shortage lies, and which broader economic forces are pushing Melbourne real estate forward. According to the report, the combination of fast population growth, major infrastructure projects, and strong rental demand makes Melbourne CBD one of the country’s most attractive property markets for investors pursuing long-term capital appreciation and sustainable wealth creation.
The demographic numbers come first. The report projects that Melbourne will overtake Sydney as Australia’s largest city by 2032, and that its population will reach 7.45 million by 2040. Over the past decade, growth has been consistently strong, driven largely by international Immigration and migration from other states. In 2024 alone, Melbourne received 446,000 new overseas arrivals.
Housing supply has not kept pace. The City of Melbourne estimates that 21,600 additional dwellings will be needed by 2028, yet only 8,900 new apartments are expected to be completed. That leaves a supply deficit of 60%. The gap between how many homes are needed and how many are coming points to potential for sustained price growth and solid rental returns on CBD apartments. Scarcity paired with population pressure is the combination that experienced buyers look for in high-yield portfolios.
Infrastructure spending adds to the case. A wave of major projects is reshaping the city, and the report links them to Melbourne’s liveability, economic resilience, and long-term appeal as an investment destination. The Melbourne Greenline, due in 2025, is a $224 million project that transforms public spaces along the Yarra River into a scenic 4 km route, with new opportunities for recreation, lifestyle, and commercial events. Also due in 2025, the West Gate Tunnel Project offers a dependable alternative to the heavily congested West Gate Bridge. It Improves freight movement and logistical connections between Melbourne’s western industrial corridors and the CBD.
Further out, the North East Link, scheduled for 2028, is Victoria’s largest integrated road engineering project. It joins key arterial routes across Melbourne’s north and east, shortens travel times, and supports coordinated urban growth across the region. The Queen Victoria Market Renewal, set for 2029, is a $268 million revitalization of one of the city’s iconic cultural hubs. It adds new public plazas, dining districts, and community activities meant to draw permanent residents and international tourists alike. The Suburban Rail Loop, targeted for 2035, is a multi-billion-dollar rail initiative linking key middle-ring suburbs. It cuts commute times and is expected to generate heavy housing demand near high-density transport hubs such as Clayton and Sunshine.
Together, these projects make up the core of Victoria’s $107 billion infrastructure pipeline, which raises Melbourne’s global competitiveness and directly supports long-term property value growth. For strategic investors, buying near major infrastructure nodes is a proven way to capture above-average capital gains.
Price and rent data explain why apartments in particular stand out. Affordability limits in traditional housing markets have changed how buyers think, and CBD apartments are far cheaper than detached suburban homes. In 2024, the median apartment price in Melbourne CBD was roughly 56% below that of a detached house. That makes high-rise units a much more accessible entry point for first-time buyers and institutional investors, and it highlights one of the core financial advantages of an apartment over standalone land.
Rental demand in the inner city has climbed at the same time. Median weekly rent rose to $750 in late 2024 from $690 the year before, a 9% year-on-year increase. Rental conditions are tight, with vacancy rates averaging about 2.4%. Newly built CBD apartments have reliably delivered gross rental yields of 4.8%, which supports their cash flow appeal in an inflationary climate.
Supply constraints strengthen the outlook for existing stock. Opportunities for new development inside the tightly held CBD grid are becoming scarcer, so existing apartments are positioned for faster capital appreciation. The Melbourne CBD Market Outlook 2025 notes that strict regulatory and geographical limits on new supply will push capital values higher as rental and buyer demand outstrips available inventory.
The wider economy provides a further cushion. Macroeconomic indicators shape the health of both commercial and residential property, and Australia’s economic fundamentals remain resilient. Unemployment is steady at 4.0%, comfortably below the 10-year historical average of 5.3%, which points to a robust labor market. Consumer confidence has recovered as well. The ANZ-Roy Morgan Index rose 12 points year-on-year to 86.4, reflecting Improved sentiment among households and business owners. With inflation cooling to 2.8%, conditions have become more favorable for property purchases and leveraged wealth building.
Monetary policy may help too. Major financial institutions, including ANZ and NAB, are anticipating policy easing, which is expected to lower borrowing costs and bring fresh liquidity into the residential market. The Reserve Bank of Australia’s cash rate is projected to ease toward a range of 3.35% to 3.85%, which would expand purchasing power and lower hurdles for active market participants.
Taken as a whole, Melbourne CBD pairs rapid demographic expansion, generational infrastructure spending, and resilient rental performance, a combination that positions it as an elite asset class for focused investors. The acute scarcity of new developments within the central business district grid strengthens its long-term characteristics, helping well-located residential assets stay insulated from oversupply risk while capturing steady upside. Choosing the right asset in the right pocket matters, and consulting a qualified property strategist or financial advisor is the recommended step before committing capital.
The numbers in the Urbis report come down to one tension: a city adding people and rental demand faster than it can add apartments. For anyone weighing Melbourne’s property market, that Imbalance, set against a 60% supply deficit, is the central fact to watch.
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