By 2032, Melbourne is projected to pass Sydney as the largest city in Australia, and by 2040 its population is expected to reach 7.
45 million. That forecast, drawn from the “Melbourne CBD Market Outlook 2025,” sits at the heart of a case for buying property in the city’s central business district. Urbis prepared the report for Far East Consortium, one of Australia’s most respected Melbourne developers. The company wanted to understand how the local property market works, what shapes buyer behavior, and where the economy is likely to head in 2025 and beyond.
The analyst who wrote the commentary on the report has worked in the local real estate sector for a decade and has seen several market cycles come and go. He calls the data compelling and highly actionable for investors interested in commercial real estate finance and high-yield residential assets. In his telling, Melbourne has evolved from a lively cultural hub into a powerhouse of wealth generation. Its growing population, major infrastructure projects, and strong rental demand, he says, support long-term security and capital appreciation.
The numbers behind the argument start with supply. According to the city’s own estimate, the City of Melbourne will need roughly 21,600 additional dwellings by 2028. Only 8,900 new apartments are expected to be delivered in that period, a gap of close to 60%. Immigration has been the main engine of demand. In 2024 alone, 446,000 new overseas arrivals settled in the city, adding considerably to housing demand and shifting the affordability baseline across inner-city suburbs. The author argues that this pressure points to potential price growth and strong rental returns in the CBD. He also contends that buying in an undersupplied urban core is among the most dependable hedges against inflation, and a reliable route to predictable cash flow.
Government spending is the second pillar. Victoria has committed to a $107 billion infrastructure plan, which the author credits with Improving Melbourne’s liveability, strengthening its global appeal, and driving long-term growth in property values. Five projects stand out, each on its own timeline.
Two arrive in 2025. The Melbourne Greenline, a $224 million project, will reshape public spaces along the Yarra River and create a 4 kilometer route with more recreation and event opportunities, which the author says lifts the value of neighboring residential property. The West Gate Tunnel Project is a major road upgrade that gives drivers an alternative to the West Gate Bridge, eases congestion, and Improves the link between Melbourne’s west and the CBD.
The North East Link follows in 2028. It is the largest road project in Victoria’s history, connecting key arterial roads in the city’s north and east, shortening travel times, and supporting urban growth in that region. In 2029, the $268 million Queen Victoria Market Renewal is set to revitalize the iconic market with new public spaces, restaurants, and activities that draw residents and visitors. The most distant project is the Suburban Rail Loop, due in 2035. It will connect key suburbs, shorten commutes, and boost housing demand near transport hubs such as Clayton and Sunshine.
From a wealth advisory standpoint, the author concludes that real estate near state-backed infrastructure supports steady tenant demand and protects capital through economic shifts.
Price is another draw. CBD apartments cost far less than detached houses, a gap the author names as one of the main benefits of buying an apartment instead of land. In 2024, the median apartment price in the CBD was 56% below the median for a detached house, which makes apartments a much more accessible option for first-time buyers and institutional investors alike.
Rents tell a similar story. Median weekly rent in the CBD climbed to $750 in November 2024 from $690 in 2023, a 9% increase year over year. Vacancy remained remarkably low, averaging 2.4% across 2024. Newly built CBD apartments have delivered gross rental yields of 4.8%, which strengthens their appeal for investors seeking passive income through strategic acquisitions.
At the same time, the CBD grid is running out of room for new construction. The report says these supply constraints should produce consistent growth in capital values, since demand keeps comfortably outpacing supply, and that existing apartments are therefore likely to see significant capital appreciation. The author adds that for investors studying historical trends, scarcity in prime locations has always translated into superior mid-to-long-term returns.
The wider economy offers firm footing as well, including for leveraged investments and mortgage refinancing strategies. Unemployment was 4.0% in late 2024, well under the 10-year average of 5.3%, which the author reads as evidence of a resilient labor market and robust corporate health. Consumer confidence has rebounded too: the ANZ-Roy Morgan Index gained 12 points year over year to reach 86.4 in December 2024. Inflation eased to 2.8% in September 2024. Together, these readings create what the author calls a highly favorable environment for property investment and wealth accumulation.
Interest rates could add further momentum. Major banking institutions, including ANZ and NAB, forecast rate cuts that should reduce borrowing costs and stimulate more activity in the residential market. By December 2025, the Reserve Bank of Australia’s cash rate is expected to drop to between 3.35% and 3.85%, which would Improve affordability and borrowing capacity for investors entering the market.
Weighing all of this, the author sees Melbourne’s CBD as an exceptional opportunity: rapid population growth, transformative infrastructure, and strong rental performance, paired with scarce new development inside the CBD grid. That scarcity, he says, leaves existing apartments well placed for sustained capital growth. He nonetheless stresses that a diversified portfolio demands a clear strategy and a firm grasp of local market fundamentals, and he advises consulting a qualified property expert or financial advisor before making any commitment.
In the end, the argument rests on one mismatch. A city projected to pass Sydney by 2032 is building far fewer apartments than it needs, while rents, employment, and consumer confidence all point upward. Whether that gap closes is the question investors will keep watching.
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