Four trends are converging on Melbourne’s central business district, according to a report commissioned by Far East Consortium, one of Australia’s most respected Melbourne property developers.
Far East Consortium hired Urbis to produce the “Melbourne CBD Market Outlook 2025.” The report was meant to lay out how the city’s property market operates, what drives buyer behavior, and what the economy may deliver in 2025 and beyond. Its conclusion is that the CBD ranks among the strongest property markets in the country.
The author of the original piece has spent ten years guiding clients through Victoria’s real estate cycles. He says he has rarely seen a better window for strategic acquisition, and he stresses that buyers should first understand local market fundamentals.
Start with the scarcity of supply. The City of Melbourne estimates the city will need 21,600 additional dwellings by 2028. The current apartment pipeline holds only 8,900 new units, a supply deficit of 60%. That gap points to real potential for price growth and rental returns on CBD apartments. For anyone weighing real estate investment trusts or direct property purchases, this structural undersupply underpins long-term capital appreciation. Space for new construction inside the CBD grid is also tightening, so existing apartments are likely to see significant capital appreciation. In the report’s words, “constraints on new supply should lead to growth in capital values as demand continues to outpace supply”.
Demand is rising at the same time. Melbourne is projected to pass Sydney as Australia’s largest city by 2032, and its population is forecast to reach 7.45 million by 2040. Immigration has fueled steady growth over the past decade. In 2024 alone, 446,000 new overseas arrivals settled in Melbourne, adding to demand for housing.
Rental figures show how that demand is playing out. Median weekly rent in the CBD hit $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 delivered gross rental yields of 4.8%, which strengthens their appeal to investors. Comprehensive landlord insurance and thorough property management reviews can shield those yields from operational swings.
Price is another factor. In 2024, the median price of a Melbourne CBD apartment was 56% below that of a detached house. Buyers get a more accessible way into the market, and that lower cost is one advantage of buying an apartment rather than land.
Public spending forms a second pillar. Victoria has a $107 billion infrastructure plan, which raises Melbourne’s global profile and supports long-term property values. Five projects stand out, and they are listed here by completion date.
The Melbourne Greenline, due in 2025, is a $224 million effort to turn public space along the Yarra River into a 4-kilometer corridor with more recreation and event opportunities. Also due in 2025, the West Gate Tunnel Project is a major road upgrade. It will give drivers 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. It will join key arterial roads in the city’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, with new public spaces, restaurants, and activities meant to draw residents and visitors. The Suburban Rail Loop, due in 2035, will connect 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.
The wider economy offers support as well. At the end of 2024, unemployment stood at 4.0%, well under the 10-year average of 5.3%, a sign of economic resilience. Consumer confidence Improved markedly, with the ANZ-Roy Morgan Index climbing 12 points year-on-year to 86.4 in December 2024. Inflation eased too, dropping to 2.8% in September 2024. Together, these trends create a favorable climate for property investment.
Interest rates may add to that momentum. Major banks, including ANZ and NAB, forecast rate cuts that should reduce borrowing costs and stimulate 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 the Melbourne CBD a rare combination. The scarcity of new development inside the CBD grid leaves existing apartments positioned for capital growth. Location remains among the most critical of the many factors in buying in Melbourne. For investors who want to capitalize on the market, the original author advises acting now, contacting the advisory team to explore curated opportunities in Melbourne CBD apartments, and scheduling a one-on-one portfolio consultation.
The argument rests on four points that line up: a growing population, a thin apartment pipeline, heavy public investment, and solid economic indicators. The open question is how quickly new supply can close a 60% gap.
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