Melbourne’s central city is heading toward a serious housing deficit.
The City of Melbourne estimates that the CBD will need 21,600 additional dwellings by 2028, yet only 8,900 new apartments are expected to be delivered in that window. That leaves a shortfall of 60 percent, and renters are already absorbing the cost.
By late 2024, the median weekly rent in the CBD core stood at $750, compared with $690 a year earlier. That is a 9 percent annual jump, and it came while vacancy averaged only 2.4 percent. Rents in the middle of Melbourne are now at record highs.
The shortfall estimate appears in 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 report looks at how the city’s property market is changing, what drives buyers, and where the wider economy may be going in 2025 and beyond. The author of the source material says he has worked in Australian property for more than ten years. Market cycles have come and gone in that time, he says, but the inner core of Victoria’s capital has consistently performed well. He names three foundations for long-term wealth creation: population growth, major infrastructure projects, and strong rental demand.
Supply comes first. Prime land parcels inside the CBD grid are running short, which caps how much new housing can be built. For that reason, the source says, existing stock is positioned for significant capital appreciation. The Melbourne CBD Market Outlook 2025 notes that tight limits on new supply should push capital values higher as buyers compete harder. Given that deficit, the source argues, Melbourne apartments offer potential for faster capital growth and strong rental returns.
Demand is the other half. The report says Melbourne is on track to overtake Sydney as Australia’s largest city by 2032, with a projected population of 7.45 million by 2040. International Immigration has fueled much of the steady growth over the past decade. In 2024 alone, 446,000 new overseas arrivals came to Melbourne, creating a continuous flow of housing demand that bears directly on CBD real estate.
Price widens that demand further. In 2024, the median CBD apartment cost roughly 56 percent less than a detached house in the suburbs. High-density housing therefore offers a more accessible entry point for experienced buyers and first-time investors alike. On the income side, newly built CBD apartments have consistently delivered average gross rental yields of 4.8 percent, a return the source describes as a defensive quality in an inflationary portfolio.
Public spending on infrastructure adds another layer. A series of large projects is reshaping connectivity and lifting property values along key corridors.
The Melbourne Greenline, due in 2025, is a $224 million initiative. It will turn public spaces along the Yarra River into a 4 kilometer linear park, with new recreational and commercial opportunities. Also due in 2025, the West Gate Tunnel Project gives drivers an Important alternative to the West Gate Bridge. It eases congestion and smooths freight and passenger traffic between Melbourne’s western precincts and the CBD.
The North East Link, planned for 2028, is Victoria’s largest road project. It ties together major arterial routes across the city’s north and east, shortening travel times and supporting decentralized urban growth. The Queen Victoria Market Renewal, set for 2029, is a $268 million revitalization of the historic marketplace, adding public plazas, dining districts, and community hubs for residents and tourists.
Furthest out is the Suburban Rail Loop, scheduled for 2035. This multi-billion-dollar transit project links middle-ring suburbs and is expected to cut commute times and raise housing demand near hubs such as Clayton and Sunshine. Together, these projects anchor Victoria’s $107 billion infrastructure pipeline, which the source says strengthens Melbourne’s global competitiveness and supports property value growth for CBD apartments.
The national economy supplies steady footing under all of this. Australia’s unemployment rate sits near 4.0 percent, well under the 10-year historical average of 5.3 percent. Consumer sentiment has rebounded noticeably, with the ANZ-Roy Morgan Index climbing 12 points year-on-year to 86.4 as inflation cooled to 2.8 percent. Major financial institutions expect the Reserve Bank of Australia to cut interest rates, bringing the cash rate down toward a range of 3.35 percent to 3.85 percent. Borrowing costs would ease as a result, and the source expects that cycle to release pent-up buyer demand and speed up market activity across Victoria.
From these threads, the source draws its conclusion. Rapid population growth, heavy infrastructure spending, and strong rental performance combine, it says, into an elite investment proposition for the Melbourne CBD. Future high-density development inside the central grid is fundamentally scarce, it argues, so well-located residential assets are in a unique position to outperform over the long term. It adds that buying property takes strategic insight, and that choosing the right asset class and location is paramount. Its recommendation is to consult a qualified property strategist or financial advisor about Melbourne CBD investment opportunities.
The numbers in the report all point in one direction: a 60 percent apartment shortfall, record rents, a growing population, and a $107 billion infrastructure pipeline. Whether new supply can ever catch up with that demand remains the open question for Melbourne’s city center in the years ahead.
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