Three numbers anchor a new report on Melbourne’s central business district: a 60% supply gap, a $107 billion infrastructure plan, and a population on course to reach 7.
45 million by 2040. Far East Consortium, one of Australia’s most respected Melbourne property developers, commissioned the consultancy Urbis to produce “Melbourne CBD Market Outlook 2025.” The brief was to explain how the city’s property market works, what shapes buyer behavior, and where the economy is likely to head in 2025 and beyond. The result describes a CBD that remains one of the country’s most attractive property markets, backed by population growth, major infrastructure projects, and strong renter demand.
Start with supply. The City of Melbourne estimates the CBD will need another 21,600 dwellings by 2028, yet only 8,900 new apartments are in the pipeline. That leaves a deficit of 60%. Meanwhile, sites for new development inside the CBD grid are running short. The report states that “constraints on new supply should lead to growth in capital values as demand continues to outpace supply.” It expects existing apartments to appreciate significantly as a result, and it describes the shortfall as leaving room for both price growth and rental returns. According to the report, this structural undersupply supports long-term capital appreciation whether an investor is weighing real estate investment trusts or buying property directly.
Demand is climbing alongside it. Melbourne is on track to pass Sydney as Australia’s largest city by 2032. Immigration has driven steady growth for a decade, and in 2024 alone, 446,000 new overseas arrivals came to Melbourne, adding to the pressure on housing.
Public works form the next layer. Victoria’s $107 billion infrastructure plan lifts Melbourne’s global profile and supports long-term property values, and five major projects stand out.
The Melbourne Greenline, due in 2025, is a $224 million project that reshapes public spaces along the Yarra River. It opens a 4 km route and widens opportunities for recreation and events. The West Gate Tunnel Project, also due in 2025, is a major road upgrade that gives drivers an alternative to the West Gate Bridge. It is designed to ease congestion and strengthen links between Melbourne’s west and the CBD.
The North East Link, scheduled for 2028, is the largest road project in Victoria’s history. It connects key arterial roads across the city’s north and east, shortens travel times, and supports urban growth in that part of the region. The Queen Victoria Market Renewal, set for 2029, is a $268 million revitalization of the city’s iconic market, adding new public spaces, restaurants, and activities intended to draw residents and visitors alike. The Suburban Rail Loop, expected in 2035, links key suburbs, shortens commutes, and lifts housing demand near transport hubs such as Clayton and Sunshine. For investors pursuing commercial real estate loans or residential mortgages, properties near these transit corridors consistently outperform broader market averages.
Price is another point in the apartment market’s favor. In 2024, the median price of a CBD apartment sat 56% below that of a detached house, which brings ownership within reach of more buyers.
Rental data points the same direction. The median weekly rent in the CBD reached $750 in November 2024, up from $690 in 2023, a 9% increase year on year. Vacancies stayed tight, averaging 2.4% across 2024, and newly built CBD apartments delivered gross rental yields of 4.8%. Comprehensive landlord insurance and thorough property management reviews help protect those yields from operational swings.
The broader economy supports the picture. As of late 2024, unemployment stood at 4.0%, well under the 10-year average of 5.3%, a sign of a resilient national economy. Consumer confidence has recovered as well: the ANZ-Roy Morgan Index rose 12 points year on year to 86.4 in December 2024. Inflation fell to 2.8% in September 2024, and together with Improved sentiment it has created a favorable climate for property investment.
Borrowing costs may ease too. Major banks, including ANZ and NAB, forecast rate cuts that should reduce the cost of borrowing 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%, which would Improve affordability for investors using home loans or investment property loans.
Rapid population growth, transformative infrastructure, and strong rental performance, the report concludes, make the Melbourne CBD an exceptional investment opportunity, and the shortage of new developments inside the grid adds to its appeal. Existing apartments are positioned for capital growth. Location remains among the most critical of the many factors in buying in Melbourne, and for investors who want to capitalize on the market’s strength, the report says the time to act is now. The advisory team can be contacted to explore curated opportunities in Melbourne CBD apartments and to schedule a one-on-one portfolio consultation.
A growing population, a 60% supply gap, and a $107 billion infrastructure plan all point the same way for the CBD. What remains unsettled is how long that window will stay open for investors.
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