Melbourne’s central business district is drawing attention as one of the strongest property markets in Australia.
Rising population numbers, major infrastructure projects, and robust rental demand set it apart. After ten years of guiding clients through Victoria’s real estate cycles, the author of the original piece says he has rarely seen a more compelling window for strategic acquisition, and that reading the local market fundamentals is essential before buying.
The research behind the outlook comes from Far East Consortium, regarded as one of Australia’s most respected Melbourne property developers. The company commissioned Urbis to produce the “Melbourne CBD Market Outlook 2025” report. The goal was to better understand how the city’s property market works, what shapes purchasing behavior, and what the economy may hold in 2025 and beyond.
Start with the numbers on people. Melbourne is projected to overtake Sydney as Australia’s largest city by 2032, and its population is forecast to hit 7.45 million by 2040, according to the report. Immigration has powered steady growth over the past decade. In 2024 alone, 446,000 new overseas arrivals came to Melbourne, adding to housing demand.
Housing supply is not keeping up. The City of Melbourne estimates that 21,600 additional dwellings will be needed by 2028, yet the current apartment pipeline contains only 8,900 new apartments. That leaves a supply deficit of 60%. The gap points to meaningful potential for price growth and rental returns on Melbourne CBD apartments. For anyone weighing real estate investment trusts or direct property purchases, this structural undersupply is the foundation of long-term capital appreciation.
Infrastructure adds another layer. Victoria has a $107 billion infrastructure plan, which strengthens Melbourne’s global appeal and drives long-term property value growth. Five projects stand out. The Melbourne Greenline, due in 2025, is a $224 million effort to transform public spaces along the Yarra River into a 4 km corridor with better recreation and event opportunities. The West Gate Tunnel Project, also due in 2025, is a major road upgrade that will offer an alternative to the West Gate Bridge, easing congestion and Improving connectivity between Melbourne’s west and the CBD. The North East Link, scheduled for 2028, is Victoria’s largest road project and will join key arterial roads in Melbourne’s north and east, cutting travel times and supporting urban growth across the region. The Queen Victoria Market Renewal, set for 2029, is a $268 million revitalization of the iconic market that adds new public spaces, restaurants, and activities to draw residents and visitors. The Suburban Rail Loop, due in 2035, will link key suburbs, shorten commutes, and lift 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 a large part of why apartments perform well. In 2024, the median price of a Melbourne CBD apartment was 56% lower than that of a detached house, which makes apartments a more accessible entry point for buyers. That affordability is one of the advantages of buying an apartment instead of land.
Rents tell a similar story. Median weekly rent in the CBD reached $750 in November 2024, up from $690 in 2023, a 9% year-on-year increase. A low vacancy rate, averaging 2.4% in 2024, supported the rise. Newly built CBD apartments achieved gross rental yields of 4.8%, which adds to their investment appeal.
Room for new construction inside the CBD grid is becoming scarcer, so 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”. Comprehensive landlord insurance and thorough property management reviews can protect those yields against operational fluctuations.
The wider economy provides support as well. As of late 2024, the unemployment rate stood at 4.0%, well below the 10-year average of 5.3%, which reflects a resilient economy. Consumer confidence has Improved significantly, with the ANZ-Roy Morgan Index rising 12 points year-on-year to 86.4 in December 2024. Inflation has also eased, falling to 2.8% in September 2024, and together these trends create a favorable environment for property investment.
Interest rates may help 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 fall to between 3.35% and 3.85%, Improving affordability for investors using home loans or investment property loans.
Taken together, rapid population growth, transformative infrastructure, and strong rental performance give Melbourne CBD a rare combination, and the scarcity of new developments inside the CBD grid leaves existing apartments positioned for capital growth. Location remains among the most critical of the many factors involved in buying in Melbourne. The original author’s advice to investors who want to capitalize on the market is to act now, and to contact the advisory team to explore curated opportunities in Melbourne CBD apartments and schedule a one-on-one portfolio consultation.
The main points hold together clearly: a growing population, a thin apartment pipeline, heavy public investment, and solid economic indicators all point in the same direction for the city’s central market. What remains open is how quickly new supply can close a 60% gap.
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