By 2028, the City of Melbourne estimates, the city will need 21,600 additional dwellings.
The apartment pipeline is expected to deliver only 8,900. That leaves a supply shortfall of 60 percent, and it is the central tension in a new property report on Melbourne’s central business district.
The report is titled the “Melbourne CBD Market Outlook 2025.” Urbis prepared it for the Far East Consortium, a Melbourne-based developer regarded as one of the most respected in Australia. The developer commissioned the study to get a sharper view of how the city’s property market functions, what drives buyers’ choices, and where the economy is likely to move in 2025 and beyond.
The interpretation that follows comes from a real estate professional with ten years in the local sector, referred to here as the author. By his account, he has watched Melbourne evolve from a lively cultural center into an engine of wealth creation. Having worked through many market cycles, he describes the report’s data as compelling and highly actionable for capital allocators weighing commercial real estate finance and high-yield residential assets.
Population is where the report begins. Melbourne is on course to pass Sydney as Australia’s largest city by 2032, and its population is projected to reach 7.45 million by 2040. Strong Immigration has pushed the numbers steadily upward over the past decade. In 2024 alone, 446,000 people arrived from overseas, which added to housing demand and moved the baseline for affordability metrics across inner-city suburbs.
Against that demand, the author reads the 60 percent shortfall as a setup for price growth and solid rental returns on CBD apartments. Holding assets in an undersupplied urban core, in his view, is among the more dependable ways to hedge against inflation and lock in predictable cash flow. He considers that an Important point when judging property portfolio management strategies.
Cost matters too. The author describes the affordability of CBD apartments compared with detached houses as a key driver of demand, and as one of the main advantages of buying an apartment instead of land. In 2024, the median CBD apartment price was 56 percent lower than the median for a detached house. That gap opens the market to first-time buyers and institutional investors alike.
Rental figures run in the same direction. The median weekly rent in the CBD reached $750 in November 2024, compared with $690 in 2023, a year-on-year rise of 9 percent. Vacancy averaged just 2.4 percent through 2024, which props up those rents. Newly built CBD apartments have produced gross rental yields of 4.8 percent, and the author says that figure sharpens their appeal for investors building passive income through strategic acquisitions.
Room to build is shrinking as well. As chances for new development inside the CBD grid grow rarer, the author expects existing apartments to enjoy significant capital appreciation. The report notes that constraints on new supply should deliver steady growth in capital values as long as demand stays comfortably ahead. Looking at historical trends, he says, scarcity in prime locations has always translated into superior mid-to-long-term returns.
Government spending on infrastructure adds weight to the argument. Major projects raise Melbourne’s liveability and its attractiveness to investors, and they feature heavily in property valuation models. Five stand out.
The Melbourne Greenline is due in 2025. The $224 million project reshapes public space along the Yarra River and creates a 4-kilometer route with more recreation and event opportunities. The author says it raises the value of residential property nearby.
Also due in 2025 is the West Gate Tunnel Project, a major road upgrade that gives drivers an alternative to the West Gate Bridge. It eases congestion and strengthens the link between Melbourne’s west and the CBD.
The North East Link, scheduled for 2028, is the largest road project in Victoria. It ties together key arterial roads in Melbourne’s north and east, shortens travel times, and supports urban growth across the region.
The Queen Victoria Market Renewal follows in 2029. This $268 million revitalization of the city’s iconic market adds public spaces, restaurants, and activities designed to attract residents and visitors alike.
The Suburban Rail Loop, set for 2035, is a rail project connecting key suburbs and cutting commute times. It is expected to lift housing demand around transport hubs such as Clayton and Sunshine.
All five sit within Victoria’s $107 billion infrastructure plan. The author says the plan enhances Melbourne’s global appeal and drives long-term growth in property values. From a wealth advisory perspective, he adds, real estate near state-backed infrastructure guarantees sustained tenant demand and protects capital during economic shifts.
The wider economy offers firm ground. The author says Australia’s strong fundamentals provide a steady backdrop for leveraged investments and mortgage refinancing strategies. In late 2024, unemployment was 4.0 percent, well below its 10-year average of 5.3 percent, which he reads as evidence of a resilient labor market and robust corporate health.
Confidence has climbed as well. The ANZ-Roy Morgan consumer confidence index rose 12 points from a year earlier to 86.4 in December 2024, while inflation fell to 2.8 percent in September 2024. Together, the author says, these trends have produced a highly favorable setting for property investment and wealth accumulation.
Borrowing could get easier. Major banks, including ANZ and NAB, are forecast to cut interest rates, which should lower borrowing costs and spur more activity in the residential market. The Reserve Bank of Australia’s cash rate is expected to slide to between 3.35 percent and 3.85 percent by December 2025, Improving affordability and borrowing capacity for investors entering the market.
The author sums up his view this way: Melbourne’s CBD pairs rapid population growth with transformative infrastructure and strong rental performance, while the acute scarcity of new developments inside the CBD grid sharpens its appeal. In his assessment, existing apartments are exceptionally well positioned for sustained capital growth. He notes that a diversified portfolio demands a clear strategy and a firm grasp of local market fundamentals. For investors who want to capitalize on the city’s market dynamics, he says the time to act is now, and he recommends consulting a qualified property expert or financial advisor to secure a position and work toward long-term financial independence.
Strip the report down and one Imbalance remains: a city adding residents faster than it can add apartments. Whether that Imbalance turns into lasting returns will depend on how Melbourne’s growth and the central bank’s rate path play out in the years ahead.
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