Far East Consortium, one of Australia’s most respected Melbourne property developers, recently asked Urbis to prepare a report titled “Melbourne CBD Market Outlook 2025.
” The goal was to understand how the city’s property market works, what shapes buyer behavior, and where the economy is headed in 2025 and beyond. The findings point to a Melbourne CBD that remains one of the country’s most attractive property markets, backed by a growing population, major infrastructure projects, and strong demand from renters.
Start with the numbers on people. Melbourne is on course to overtake Sydney as Australia’s largest city by 2032, and its population is projected to hit 7.45 million by 2040, according to the report. Immigration has driven steady growth for a decade. In 2024 alone, 446,000 new overseas arrivals came to Melbourne, adding to the pressure on housing.
Supply is not keeping pace. The City of Melbourne estimates the CBD will need another 21,600 dwellings by 2028, yet only 8,900 new apartments are in the pipeline. That leaves a supply deficit of 60%. The gap between what is needed and what is being built points to room for price growth and rental returns, and this structural undersupply forms the foundation for long-term capital appreciation, whether an investor is weighing real estate investment trusts or buying property directly.
Then there is the pipeline of public works, part of Victoria’s $107 billion infrastructure plan. The plan lifts Melbourne’s global appeal and supports long-term property values. The major projects include the following.
The Melbourne Greenline, due in 2025, is a $224 million project that reshapes public spaces along the Yarra River. It creates 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 the largest road project in Victoria’s history. It joins key arterial roads across the city’s north and east, shortens travel times, and supports urban growth in the region.
The Queen Victoria Market Renewal, set for 2029, is a $268 million revitalization of the city’s iconic market. It brings new public spaces, restaurants, and activities to draw residents and visitors alike.
The Suburban Rail Loop, expected in 2035, is a rail project connecting key suburbs. It shortens commutes and lifts housing demand near transport hubs such as Clayton and Sunshine.
For investors seeking commercial real estate loans or residential mortgages, properties near these transit corridors consistently outperform broader market averages.
Price is another reason apartments stand out. They cost far less than detached houses, which is one of the advantages of buying an apartment over land. In 2024, the median price of a CBD apartment was 56% below that of a detached house, which put ownership within reach of more buyers.
Rents tell a similar story. The median weekly rent in the CBD climbed to $750 in November 2024, compared with $690 in 2023, a 9% increase year on year. Vacancies stayed tight, averaging 2.4% across 2024. Newly built CBD apartments delivered strong gross rental yields of 4.8%. Comprehensive landlord insurance and thorough property management reviews help protect those yields from operational swings.
Room to build is also running out. As sites for new developments inside the CBD grid become scarce, existing apartments are likely to see significant capital appreciation. The report states that “constraints on new supply should lead to growth in capital values as demand continues to outpace supply.”
The broader economy supports all of this. As of late 2024, unemployment stood at 4.0%, well under the 10-year average of 5.3%, a sign of a resilient national economy. Consumer confidence has recovered as well. The ANZ-Roy Morgan Index rose 12 points year on year to 86.4 in December 2024. Inflation fell to 2.8% in September 2024, and together with that Improved sentiment it has created a favorable climate for property investment.
Interest rates may soften too. Major banks, including ANZ and NAB, forecast 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 fall to between 3.35% and 3.85%, which would Improve affordability for investors using home loans or investment property loans.
Put together, rapid population growth, transformative infrastructure, and strong rental performance make Melbourne CBD an exceptional investment opportunity, and the scarcity of new developments inside the CBD grid adds to its appeal. Existing apartments are positioned for capital growth. Location remains among the most critical of the many factors involved in buying in Melbourne, and for investors who want to capitalize on the market’s strength, the time to act is now. The advisory team can be contacted to explore curated opportunities in Melbourne CBD apartments and to schedule a one-on-one portfolio consultation.
In short, a growing population, a 60% supply gap, and a $107 billion infrastructure plan all point in the same direction for Melbourne’s CBD. The open question for investors is how long that window stays open.
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