Melbourne is forecast to reach a population of 7.
45 million by 2040, and projections show it passing Sydney as Australia’s largest city by 2032. The central business district will have to house a share of that growth, yet the supply numbers there look thin.
The City of Melbourne calculates that the CBD requires 21,600 additional dwellings by 2028. Only 8,900 new apartments are under development, a gap of 60%. Land makes the problem harder, because the space available for new buildings inside the CBD grid keeps getting smaller.
These findings appear in “Melbourne CBD Market Outlook 2025,” a study Urbis prepared for Far East Consortium, a developer widely considered among the most respected in Melbourne. The document examines how the city’s property market operates, what drives buyers, and what the economy may deliver in 2025 and the years that follow. An adviser with a decade of experience guiding clients through Victoria’s property cycles draws on the study to support his argument. He says he has rarely encountered conditions as well suited to a strategic purchase as those now emerging in central Melbourne. In his view, population growth, major infrastructure projects, and strong rental demand set the CBD apart, and buyers should understand those fundamentals before they commit.
The report identifies supply as the market’s most vulnerable point. That shortfall signals real potential for price growth and rental returns on CBD apartments. For investors weighing real estate investment trusts against direct ownership, the structural undersupply favors long-term capital appreciation, and existing apartments could gain considerable value as a result. In the report’s words: “constraints on new supply should lead to growth in capital values as demand continues to outpace supply”.
Demand is heading the other way. Immigration has driven steady population growth for ten years. During 2024 alone, 446,000 new overseas arrivals settled in the city, putting further pressure on housing.
Public investment reinforces the picture. Victoria has committed to a $107 billion infrastructure plan, which boosts Melbourne’s standing internationally and lifts long-term property values. Five projects stand out, and they are listed here by completion date.
The Melbourne Greenline opens first, in 2025. The $224 million program will turn public spaces along the Yarra River into a 4 kilometer corridor with additional recreation and event options. Also scheduled for 2025 is the West Gate Tunnel Project, a major road upgrade that gives drivers an alternative to the West Gate Bridge. It is expected to ease congestion and Improve connectivity between Melbourne’s west and the CBD.
In 2028, the North East Link comes online. As Victoria’s largest road project, it will join key arterial roads in Melbourne’s north and east, cut travel times, and support urban growth across the region. The Queen Victoria Market Renewal follows in 2029. That $268 million revitalization of the iconic market will add new public spaces, restaurants, and activities designed to draw residents and visitors. Last is the Suburban Rail Loop, due in 2035, which will link key suburbs, shorten commutes, and lift housing demand around 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.
Pricing strengthens the case for apartments. In 2024, the median price of a Melbourne CBD apartment sat 56% below the median for a detached house, giving buyers an easier way in. That lower cost is one advantage of choosing an apartment over land.
Rents point the same direction. The median weekly rent in the CBD reached $750 in November 2024, up from $690 in 2023, an annual increase of 9%. Vacancy averaged 2.4% during 2024, and that tight rate helped push rents higher. Newly built CBD apartments delivered gross rental yields of 4.8%, which adds to their appeal. Comprehensive landlord insurance and thorough property management reviews can protect those yields from operational swings.
The broader economy offers backing as well. Unemployment stood at 4.0% at the end of 2024, well below the 10-year average of 5.3%, a sign of resilience. Consumer confidence has recovered markedly: the ANZ-Roy Morgan Index rose 12 points from a year earlier to 86.4 in December 2024. Inflation also eased, falling to 2.8% in September 2024. Together, these trends create a favorable climate for property investment.
Borrowing could become cheaper, too. Major banks, including ANZ and NAB, forecast rate cuts that should lower borrowing costs and stimulate activity in the property 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 for investors using home loans or investment property loans.
Taken together, these factors give Melbourne’s CBD an uncommon mix of rapid population growth, transformative infrastructure, and strong rental performance. Because so little new development can fit inside the CBD grid, existing apartments are positioned for capital growth, and among the many factors in a Melbourne purchase, location remains one of the most critical. The original author’s advice to investors who want to capitalize on the market is to act now, contact the advisory team to explore curated opportunities in Melbourne CBD apartments, and book a one-on-one portfolio consultation.
Two numbers frame the whole story: a need for 21,600 dwellings against a pipeline of 8,900, in a city heading toward 7.45 million residents. How quickly builders can narrow that 60% gap remains the open question for the central market in the years ahead.
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