Melbourne is on track to overtake Sydney as the largest city in Australia by 2032.
By 2040, its population is projected to reach 7.45 million, according to the Melbourne CBD Market Outlook 2025. That single projection anchors much of the argument for putting money into apartments in the city center.
The report was commissioned by Far East Consortium, one of Australia’s most respected Melbourne property developers. The company asked Urbis to study how the city’s property market works, what shapes buyer behavior, and what the economy may look like in 2025 and beyond. The advisor behind this material says a decade of guiding clients through Victoria’s real estate cycles has rarely turned up a better moment for a strategic purchase. Melbourne CBD remains one of the most attractive property markets in the country, with a growing population, major infrastructure projects, and strong rental demand.
Population is the first pillar. Immigration has driven steady growth in Melbourne over the past decade, and in 2024 alone the city received 446,000 new overseas arrivals. That keeps housing demand rising. The City of Melbourne estimates that 21,600 additional dwellings will be needed by 2028, yet only 8,900 new apartments are in the pipeline. The resulting supply deficit is 60%. For investors weighing real estate investment trusts or direct property purchases, this structural undersupply is the foundation of long-term capital appreciation, and it points to real potential for price growth and rental returns.
Pricing explains part of the appeal. Buying an apartment rather than land offers an affordability edge, and in 2024 the median apartment price in the CBD sat 56% below the median for a detached house. That makes apartments the more accessible entry point for buyers.
Rents tell a similar story. The median weekly rent reached $750 in November 2024, compared with $690 in 2023, a 9% increase year-on-year. Vacancy stayed tight, averaging 2.4% across 2024, and newly built CBD apartments delivered gross rental yields of 4.8%. Room for new development inside the CBD grid is shrinking, so existing apartments look set for significant capital growth. The Melbourne CBD Market Outlook 2025 states that “constraints on new supply should lead to growth in capital values as demand continues to outpace supply”. Investors can shield these yields from operational swings by securing comprehensive landlord insurance and carrying out thorough property management reviews.
Infrastructure adds another layer. Victoria has an infrastructure plan worth $107 billion, which lifts Melbourne’s global profile and supports long-term property values. Within it, five projects stand out:
The Melbourne Greenline, due in 2025, is a $224 million project to remake public spaces along the Yarra River. It will create a 4 km route with better recreation and event options.
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 should ease congestion and Improve links between Melbourne’s west and the CBD.
The North East Link, scheduled for 2028, is Victoria’s largest road project. It will join key arterial roads in Melbourne’s north and east, shorten travel times, and support urban growth across the region.
The Queen Victoria Market Renewal, set for 2029, is a $268 million revitalization of the city’s iconic market. It adds public spaces, restaurants, and activities to draw residents and visitors.
The Suburban Rail Loop, planned for 2035, will connect key suburbs, cut commute times, and lift housing demand near transport hubs such as Clayton and Sunshine.
For investors pursuing commercial real estate loans or residential mortgages, properties near these transit corridors have consistently outperformed broader market averages.
The national economy provides the backdrop. As of late 2024, unemployment stood at 4.0%, well under the 10-year average of 5.3%, a sign of a resilient economy. Consumer confidence has recovered as well: the ANZ-Roy Morgan Index climbed 12 points year-on-year to 86.4 in December 2024. Inflation fell to 2.8% in September 2024, and together these trends have created a favorable climate for property investment.
Lending conditions may help too. Major banks, including ANZ and NAB, forecast interest 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 fall to between 3.35% and 3.85%, which would Improve affordability for investors using home loans or investment property loans.
Taken together, rapid population growth, transformative infrastructure, and strong rental performance make Melbourne CBD an exceptional investment opportunity, and the scarcity of new development inside the CBD grid leaves existing apartments positioned for capital growth. Location remains one of the most critical of the many factors to weigh when buying in Melbourne. For investors who want to capitalize on the market’s strength, the advisory team invites them to get in touch to explore curated opportunities in Melbourne CBD apartments and to schedule a one-on-one portfolio consultation.
The numbers point in one direction: a growing city, a shrinking window for new supply, and rents that keep climbing. Whether those forces carry the market through 2025 and beyond is the question every prospective buyer will have to answer.
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