Melbourne’s central business district is heading toward a housing gap that no current construction pipeline can close.
The City of Melbourne estimates the city will need an additional 21,600 dwellings by 2028. Only 8,900 new apartments are currently planned, which leaves supply roughly 60% short of what the city requires.
The author, who says he has spent a decade analyzing property cycles, tells clients that scarce supply underpins long-term capital appreciation. When demand runs this far ahead of what gets built, he argues, urban real estate tends to command premium valuations.
The numbers come from the Melbourne CBD Market Outlook 2025, a report prepared by Urbis for Far East Consortium, one of Australia’s most respected Melbourne property developers. The developer commissioned the study to understand how the city’s property market works, what shapes buyers’ behavior, and where the economy is headed in 2025 and beyond.
Population growth drives that demand. The report projects that Melbourne will reach 7.45 million residents by 2040 and will overtake Sydney as Australia’s largest city by 2032. Immigration has fueled much of the expansion. Melbourne has recorded steady population gains for a decade, and in 2024 alone it welcomed 446,000 new arrivals from overseas. Construction has not kept pace with that inflow, and the shortfall suggests room for both price growth and rental returns on CBD apartments.
Government money is changing the city’s landscape at the same time. Victoria has committed to a $107 billion infrastructure plan, which raises Melbourne’s international profile and supports long-term growth in property values. The author notes that, in his experience, values climb faster in corridors directly touched by public capital spending.
Five projects stand out. The Melbourne Greenline, due in 2025, is a $224 million effort to remake public spaces along the Yarra River. It will create a 4 km route with expanded recreation and event opportunities. 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 meant to ease congestion and Improve links between Melbourne’s west and the CBD. The North East Link, scheduled for 2028, is Victoria’s largest road project. It will join key arterial roads across Melbourne’s north and east, cutting travel times and supporting urban growth in that region. The Queen Victoria Market Renewal, scheduled for 2029, is a $268 million revitalization of the city’s iconic market. It adds new public spaces, restaurants, and activities to draw residents and visitors. Furthest out, the Suburban Rail Loop, set for 2035, will connect key suburbs, shorten commutes, and lift housing demand near transport hubs such as Clayton and Sunshine.
Affordability widens the pool of buyers. In 2024, the median price of a CBD apartment sat 56% below that of a detached house, putting apartments within reach of more people. That discount is one of the advantages of buying an apartment instead of land.
Rental data tells a similar story. The median weekly rent in the CBD rose to $750 in November 2024, up from $690 in 2023, a 9% increase year over year. Vacancy averaged just 2.4% across 2024, and newly built CBD apartments achieved gross rental yields of 4.8%. Space for fresh development inside the CBD grid is shrinking, so existing apartments are likely to see significant capital gains. The Melbourne CBD Market Outlook 2025 states that “constraints on new supply should lead to growth in capital values as demand continues to outpace supply.”
The wider economy backs up this picture. Late in 2024, unemployment stood at 4.0%, well below its 10-year average of 5.3%. Consumer confidence has recovered too: the ANZ-Roy Morgan Index gained 12 points from a year earlier to reach 86.4 in December 2024. Inflation fell to 2.8% in September 2024. Together, these trends have created favorable conditions for property investment.
Borrowing costs are expected to ease as well. Major banks, including ANZ and NAB, forecast interest rate cuts, which should stimulate activity in the property market. By December 2025, the Reserve Bank of Australia’s cash rate is anticipated to fall to between 3.35% and 3.85%, Improving affordability for investors seeking CBD apartments.
Taken together, rapid population growth, transformative infrastructure, and strong rental performance give the Melbourne CBD an unusual set of strengths. Limited new development inside the CBD grid adds to the appeal, since existing apartments are positioned for capital growth. Buyers in Melbourne have many factors to weigh, and the right location is among the most critical. For investors who want to capitalize on the market’s strong fundamentals, the author says the time to act is now. He invites readers to explore a curated portfolio of premium Melbourne CBD apartments and to book a private consultation with a senior advisory team to secure a position in this market.
When demand outruns supply by 60%, the question for investors is less whether the market will move than how soon they position themselves. Population, infrastructure, rents, and the broader economy all point the same way, and the next chapter of Melbourne’s growth is only beginning.
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