Ten years of advising clients through Victoria’s property cycles have convinced one adviser of something specific: he has seldom seen conditions better for a strategic purchase than those now forming in the heart of Melbourne.
Population growth, large infrastructure projects, and strong rental demand set the central business district apart. Anyone buying there, he says, should first grasp the local fundamentals.
The numbers come from Far East Consortium, regarded as one of Australia’s most respected Melbourne developers. The company commissioned Urbis to produce the “Melbourne CBD Market Outlook 2025” report. The study set out to explain how the city’s property market works, what motivates buyers, and what the economy could deliver in 2025 and beyond.
Start with the supply gap, because the report treats it as the weak point. The City of Melbourne estimates the city will need 21,600 additional dwellings by 2028. The current apartment pipeline contains just 8,900 new apartments, which leaves a 60% supply deficit. That shortfall points to real potential for price growth and rental returns on CBD apartments. For anyone weighing real estate investment trusts or direct purchases, this structural undersupply underpins long-term capital appreciation. Space for new construction inside the CBD grid is also shrinking, so existing apartments are likely to appreciate significantly. The report puts it this way: “constraints on new supply should lead to growth in capital values as demand continues to outpace supply”.
Demand is moving the other direction. Melbourne is projected to overtake Sydney as Australia’s largest city by 2032, and its population is forecast to hit 7.45 million by 2040. Immigration has driven steady growth for a decade. In 2024 alone, 446,000 new overseas arrivals settled in the city, adding to housing demand.
Government spending reinforces the picture. Victoria has a $107 billion infrastructure plan, which strengthens Melbourne’s global appeal and lifts long-term property values. Five projects stand out, listed here by completion date.
The Melbourne Greenline, due in 2025, is a $224 million program to convert public spaces along the Yarra River into a 4 km corridor with more recreation and event opportunities. The West Gate Tunnel Project, also due in 2025, is a major road upgrade that will give drivers an alternative to the West Gate Bridge, easing congestion and Improving connectivity between Melbourne’s west and the CBD. The North East Link, scheduled for 2028, is Victoria’s largest road project. It will connect key arterial roads in Melbourne’s north and east, cutting travel times and supporting urban growth across the region. The Queen Victoria Market Renewal, set for 2029, is a $268 million revitalization of the iconic market, bringing new public spaces, restaurants, and activities to attract residents and visitors. The Suburban Rail Loop, due in 2035, will link key suburbs, shorten commutes, and raise housing demand near transport hubs such as Clayton and Sunshine. For investors seeking commercial real estate loans or residential mortgages, properties near these transit corridors consistently outperform broader market averages.
Pricing explains part of why apartments perform well. In 2024, the median price of a Melbourne CBD apartment was 56% below that of a detached house, offering buyers a more accessible entry point. That affordability is one advantage of choosing an apartment over land.
Rents tell a similar story. Median weekly rent in the CBD reached $750 in November 2024, compared with $690 in 2023, a 9% year-on-year increase. A low vacancy rate, averaging 2.4% in 2024, helped drive the rise. Newly built CBD apartments achieved gross rental yields of 4.8%, adding to their appeal. Comprehensive landlord insurance and thorough property management reviews can shield those yields from operational swings.
The wider economy adds support. As of late 2024, unemployment stood at 4.0%, well under the 10-year average of 5.3%, a sign of resilience. Consumer confidence has Improved significantly: the ANZ-Roy Morgan Index climbed 12 points year-on-year to 86.4 in December 2024. Inflation has cooled too, dropping to 2.8% in September 2024. Together, these trends create a favorable climate for property investment.
Interest rates could help buyers as well. Major banks, including ANZ and NAB, forecast rate cuts that should lower borrowing costs and stimulate activity in the property market. By December 2025, the Reserve Bank of Australia’s cash rate is expected to fall to between 3.35% and 3.85%, Improving affordability for investors using home loans or investment property loans.
Put these pieces together and Melbourne CBD offers a rare combination of rapid population growth, transformative infrastructure, and strong rental performance. The scarcity of new development inside the CBD grid leaves existing apartments positioned for capital growth. Of the many factors in buying in Melbourne, location remains among the most critical. The original author’s advice to investors who want to capitalize on the market is to act now, contact the advisory team to explore curated opportunities in Melbourne CBD apartments, and schedule a one-on-one portfolio consultation.
A swelling population, a thin apartment pipeline, heavy public investment, and solid economic indicators all point in one direction for the city’s central market. The open question is how fast new supply can close that 60% gap.
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