Start with the gap.
Melbourne’s central city needs 21,600 additional dwellings by 2028, according to City of Melbourne projections, but the residential apartment pipeline is set to supply just 8,900. That leaves the supply roughly 60 percent short of what is required, and the figure anchors a new study titled the “Melbourne CBD Market Outlook 2025.”
Research firm Urbis prepared the report, and Far East Consortium, a prominent Melbourne property developer, commissioned it. The study examines how the market is shifting, what shapes buyer behavior, and how the wider economy could influence 2025 and the years after. Its main finding is that the inner-city core of Victoria’s capital has proven resilient across market cycles. The report ties that resilience to population growth, major infrastructure projects, and strong rental demand, and says those forces make the area attractive to investors focused on building long-term wealth. The argument rests on three pillars.
The first is population. Melbourne is on track to overtake Sydney as Australia’s largest city by 2032, the report says, and it projects 7.45 million residents by 2040. Over the past decade, international Immigration has driven most of that growth. In 2024 alone, 446,000 new overseas arrivals settled in Melbourne. All of them need housing, and that need flows straight into demand for CBD property. Set beside the supply figures above, the Imbalance is stark, and the report sees strong potential for accelerated capital growth and solid rental returns on Melbourne apartments.
The second pillar is infrastructure. According to the report, a series of major projects is reshaping how the city connects and raising property values along key corridors. It also expects those projects to Improve Melbourne’s livability and reinforce its long-term standing as a high-yield investment destination.
Two projects are due in 2025. The Melbourne Greenline, a $224 million initiative, will turn public space along the Yarra River into a linear park 4 kilometers long, creating new recreational and commercial opportunities. The West Gate Tunnel Project, a critical road upgrade, gives drivers a vital alternative to the West Gate Bridge, eases congestion, and streamlines freight and passenger movement between Melbourne’s western precincts and the CBD.
The North East Link arrives in 2028. As the largest road project in Victoria’s history, it will join major arterial routes across Melbourne’s north and east, cut travel times, and support decentralized urban growth. In 2029, the Queen Victoria Market Renewal is scheduled for completion. This $268 million revitalization of the city’s historic marketplace will add new public plazas, dining districts, and community hubs meant to draw residents and tourists alike.
Furthest out is the Suburban Rail Loop, slated for 2035. This multi-billion-dollar transit project will link middle-ring suburbs, and it is expected to shorten commutes and lift housing demand near strategic transport hubs such as Clayton and Sunshine. Every one of these projects sits inside Victoria’s $107 billion infrastructure pipeline, which the report credits with strengthening Melbourne’s global competitiveness and supporting property value growth for CBD apartments.
The third pillar pairs affordability with rental performance. The report calls affordability a primary catalyst for inner-city housing demand. In 2024, a CBD apartment’s median price sat roughly 56 percent below that of a detached suburban house, which makes high-density property an accessible entry point for experienced buyers and first-time investors alike.
Rental demand in the CBD core has reached unprecedented levels as well. Median weekly rent rose to $750 in late 2024, up from $690 a year earlier, a 9 percent increase. Vacancy averages only 2.4 percent, and that lasting tightness underpins the momentum. Newly built CBD apartments have consistently delivered strong gross rental yields, averaging 4.8 percent, which the report says reinforces their defensive qualities in a portfolio exposed to inflation.
Land supply adds another factor. Prime parcels inside the CBD grid are growing scarcer, which positions existing stock for significant capital appreciation. The report notes that strict limits on new supply will naturally push capital values higher as buyers compete harder.
On the economy, the report says conditions provide a stable macroeconomic floor. Australia’s national unemployment rate is near a healthy 4.0 percent, comfortably below its 10-year historical average of 5.3 percent. Consumer sentiment has visibly rebounded too. The ANZ-Roy Morgan Index gained 12 points year on year to reach 86.4, helped by inflation cooling to 2.8 percent.
Major financial institutions also 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 are therefore set to moderate. In the report’s view, this easing cycle will release pent-up buyer demand and accelerate market activity across Victoria.
Drawing these threads together, the report characterizes rapid demographic expansion, heavy infrastructure spending, and exceptional rental performance as an elite investment proposition for the Melbourne CBD. Because future high-density development in the central grid is fundamentally scarce, it concludes that well-located residential assets are uniquely positioned to outperform over the long term. It adds that choosing the right asset class and location is paramount, and it advises buyers to consult a qualified property strategist or financial advisor before exploring CBD investment opportunities.
The numbers all point the same way. A 60 percent apartment shortfall, a population heading toward 7.45 million, and a $107 billion infrastructure pipeline together indicate that demand for central Melbourne housing is outpacing the city’s capacity to build. Whether supply can close that gap before 2028 is the open question at the heart of the study.
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