Behind a new report on central Melbourne sits one figure: 60 percent.
That is how far the city’s housing supply falls short of what it needs. The City of Melbourne projects demand for 21,600 additional dwellings by 2028, yet the residential apartment pipeline is on track to deliver only 8,900.
The number appears in the “Melbourne CBD Market Outlook 2025,” a study prepared by the research firm Urbis. Far East Consortium, a well-known Melbourne property developer, commissioned the work. The report looks at how the market is shifting, what drives buyer behavior, and how the broader economy may affect 2025 and the years beyond. Its central conclusion is that the inner-city core of Victoria’s capital has held up through market cycles. According to the report, population growth, major infrastructure projects, and strong rental demand support that conclusion, and together they make the area appealing to investors building wealth over the long term. The case rests on three pillars, each with supporting factors.
The first pillar is population. The report says Melbourne is on track to pass Sydney as Australia’s largest city by 2032, and it projects 7.45 million residents by 2040. International Immigration has fueled most of the growth over the past decade. In 2024 alone, 446,000 new overseas arrivals settled in Melbourne. Each of them needs a place to live, and that need feeds directly into demand for CBD property. Against the supply numbers above, the Imbalance is stark. The report therefore sees strong potential for accelerated capital growth and solid rental returns on Melbourne apartments.
The second pillar is infrastructure. The report describes a series of major projects that are changing how the city connects and lifting property values along key corridors. It also expects them to Improve Melbourne’s livability and strengthen its long-term standing as a high-yield investment destination.
Two projects are due in 2025. The Melbourne Greenline is a $224 million initiative that will convert public space along the Yarra River into a linear park 4 kilometers long, opening new recreational and commercial opportunities. The West Gate Tunnel Project is a critical road upgrade. It offers drivers a vital alternative to the West Gate Bridge, eases congestion, and streamlines freight and passenger movement between Melbourne’s western precincts and the CBD.
The North East Link follows in 2028. It is the largest road project in Victoria’s history, and it will connect major arterial routes across Melbourne’s north and east, cut travel times, and support decentralized urban growth. The Queen Victoria Market Renewal is scheduled for 2029. This $268 million revitalization of the city’s historic marketplace will add new public plazas, dining districts, and community hubs designed to draw residents and tourists alike.
The Suburban Rail Loop, slated for 2035, is a multi-billion-dollar transit project linking middle-ring suburbs. It is expected to shorten commutes and lift housing demand near strategic transport hubs such as Clayton and Sunshine. All of these projects sit within Victoria’s $107 billion infrastructure pipeline, which the report credits with strengthening Melbourne’s global competitiveness and supporting property value growth for CBD apartments.
The third pillar combines affordability with rental performance. The report describes affordability as a primary catalyst for inner-city housing demand. In 2024, the median price of a CBD apartment was roughly 56 percent below that of a detached suburban house. High-density property therefore offers an accessible entry point for experienced buyers and first-time investors alike.
Rental demand in the CBD core has also reached unprecedented levels. The median weekly rent climbed to $750 in late 2024 from $690 a year earlier, a 9 percent increase. Vacancy averages just 2.4 percent, and that lasting tightness underpins the momentum. Newly built CBD apartments have consistently delivered strong gross rental yields, averaging 4.8 percent. The report says this reinforces their defensive qualities in a portfolio exposed to inflation.
Land supply is another factor. Prime parcels inside the CBD grid are growing scarcer, which positions existing stock for significant capital appreciation. The report notes that strict limits on new supply will naturally push capital values higher as buyers compete harder.
The wider economy, in the report’s words, provides a stable macroeconomic floor. Australia’s national unemployment rate is near a healthy 4.0 percent, comfortably below its 10-year historical average of 5.3 percent. Consumer sentiment has visibly rebounded as well. The ANZ-Roy Morgan Index rose 12 points year on year to 86.4, helped by inflation cooling to 2.8 percent.
Major financial institutions also expect the Reserve Bank of Australia to cut interest rates, lowering the cash rate toward a range of 3.35 percent to 3.85 percent. Borrowing costs are therefore set to moderate. According to the report, this easing cycle will release pent-up buyer demand and accelerate market activity across Victoria.
Pulling these threads together, the report characterizes rapid demographic expansion, heavy infrastructure spending, and exceptional rental performance as an elite investment proposition for the Melbourne CBD. Because future high-density development in the central grid is fundamentally scarce, it concludes that well-located residential assets are uniquely positioned to outperform over the long term. It adds that choosing the right asset class and location is paramount, and it advises buyers to consult a qualified property strategist or financial advisor before exploring CBD investment opportunities.
The report’s numbers all point in the same direction. A 60 percent apartment shortfall, a population heading toward 7.45 million, and a $107 billion infrastructure pipeline together indicate that demand for central Melbourne housing is outpacing the city’s capacity to build. Whether supply can close that gap before 2028 remains the open question at the heart of the study.
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