A single number anchors a new Urbis report on Melbourne: the central business district is short roughly 60% of the housing it requires.
Far East Consortium, one of Australia’s most respected Melbourne property developers, commissioned the study, titled “Melbourne CBD Market Outlook 2025.” The report sets out to show how the city’s property market works, what shapes buyer behavior, and where the economy is headed in 2025 and beyond. Its conclusion is that the CBD remains one of the most attractive property markets in the country, backed by population growth, major infrastructure projects, and strong renter demand.
Start with supply. The City of Melbourne estimates the CBD will need 21,600 additional dwellings by 2028. Only 8,900 new apartments are in the pipeline. That gap, about 60%, points to room for both price growth and rental returns. According to the report, this structural undersupply underpins long-term capital appreciation, whether an investor is weighing real estate investment trusts or buying property outright. Sites for new development inside the CBD grid are also running short, so existing apartments are likely to post significant capital gains. In the report’s words, “constraints on new supply should lead to growth in capital values as demand continues to outpace supply.”
Now consider demand. Melbourne is on track to overtake Sydney as Australia’s largest city by 2032, and its population is projected to hit 7.45 million by 2040. Immigration has driven steady growth for a decade. In 2024 alone, 446,000 new overseas arrivals settled in Melbourne, putting more pressure on housing.
Public spending reinforces that outlook. Victoria’s $107 billion infrastructure plan lifts Melbourne’s global profile and supports long-term property values. Five projects stand out.
The Melbourne Greenline, due in 2025, is a $224 million effort to reshape public spaces along the Yarra River, producing a 4 km route with more recreation and event opportunities. The West Gate Tunnel Project, also due in 2025, is a major road upgrade that offers drivers an alternative to the West Gate Bridge. It is meant to ease congestion and tighten links between Melbourne’s west and the CBD.
Scheduled for 2028, the North East Link is the largest road project in Victoria’s history. It connects key arterial roads across the city’s north and east, shortens travel times, and supports urban growth in that region. In 2029, the Queen Victoria Market Renewal will deliver a $268 million revitalization of the city’s iconic market, adding public spaces, restaurants, and activities for residents and visitors. The Suburban Rail Loop, expected in 2035, will link key suburbs, shorten commutes, and boost housing demand around transport hubs such as Clayton and Sunshine. For investors looking at commercial real estate loans or residential mortgages, properties near these transit corridors consistently outperform broader market averages.
Apartments carry another advantage: price. They cost far less than detached houses, which is one benefit of buying an apartment rather than land. In 2024, the median price of a CBD apartment was 56% below that of a detached house, bringing ownership within reach of more buyers.
Rental data points the same direction. 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 remained 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.
The broader economy lends support as well. 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 rebounded: 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 Improved sentiment, that has produced a favorable climate for property investment.
Borrowing costs may ease too. Major banks, including ANZ and NAB, forecast rate cuts that should lower the cost of credit and stimulate 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.
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 one of the most critical of the many factors in buying in Melbourne, and for investors who want to capitalize on the market’s strength, the report’s message is that 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.
The evidence lines up: a growing population, a 60% supply gap, and a $107 billion infrastructure plan all point in one direction for Melbourne’s CBD. What remains uncertain is how long that window will stay open for investors.
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