Between now and 2028, the City of Melbourne estimates the city center will need 21,600 additional dwellings.
The apartments currently in the pipeline will deliver only 8,900, a gap of 60%. The figures come from “Melbourne CBD Market Outlook 2025,” a report produced by Urbis for Far East Consortium, one of Australia’s most respected Melbourne property developers. The study looks at how the local property market functions, what drives buyers, and where the economy is expected to go in 2025 and beyond. A local real estate professional with ten years in the industry, who has worked through several market cycles, describes the data as compelling and highly actionable for investors considering commercial real estate finance or high-yield residential assets.
The report builds its case on four pillars, beginning with population. It projects that Melbourne will pass Sydney as Australia’s largest city by 2032 and reach 7.45 million residents by 2040. Strong Immigration has driven a decade of steady expansion, and in 2024 alone the city took in 446,000 new overseas arrivals. That influx has pushed housing demand upward and shifted the baseline of affordability metrics across inner-city suburbs. Because the apartment pipeline cannot keep up, the report sees room for price growth and healthy rental returns on CBD apartments. For anyone working through property portfolio management strategies, an asset in an undersupplied urban core remains among the more dependable hedges against inflation, and a source of predictable cash flow.
The second pillar is public investment. Large infrastructure projects are Improving Melbourne’s liveability and its appeal as an investment destination, and they carry real weight in property valuation models. The report singles out five.
Three of them arrive soon. The Melbourne Greenline, due in 2025, is a $224 million project to reshape public spaces along the Yarra River. It creates a 4 km route with more recreation and event opportunities, which lifts the value of nearby residential property. Also due in 2025, the West Gate Tunnel Project offers drivers an alternative to the West Gate Bridge, easing congestion and tightening the connection between Melbourne’s west and the CBD. Scheduled for 2028, the North East Link is the largest road project in Victoria’s history. It joins key arterial roads in the city’s north and east, cuts travel times, and supports urban growth throughout the region.
The other two come later. The Queen Victoria Market Renewal, set for 2029, is a $268 million revitalization of the city’s iconic market, adding public spaces, restaurants, and activities meant to draw residents and visitors alike. The Suburban Rail Loop, due in 2035, will link key suburbs and shorten commutes. It is also expected to lift housing demand around transport hubs such as Clayton and Sunshine.
All five projects sit within Victoria’s $107 billion infrastructure plan, which widens Melbourne’s global appeal and supports long-term growth in property values. From a wealth advisory perspective, real estate near state-backed infrastructure keeps tenant demand steady and helps preserve capital when the economy shifts.
Cost and rental performance form the third pillar. CBD apartments sell for far less than detached houses, and that difference is a major source of demand. It reflects a central advantage of buying an apartment rather than land. In 2024, the median CBD apartment price was 56% below the median for a detached house, which put apartments well within reach of first-time buyers and institutional investors alike.
Rents move in the same direction. Median weekly rent in the CBD climbed to $750 in November 2024, up from $690 in 2023, a robust 9% year-on-year increase. Vacancy averaged a remarkably low 2.4% across 2024. Newly built CBD apartments produced gross rental yields of 4.8%, which sharpens their appeal for investors seeking passive income through strategic property acquisition.
Supply, meanwhile, keeps getting tighter. Room for fresh development inside the CBD grid is becoming scarcer, so existing CBD apartments are likely to see significant capital appreciation. The Melbourne CBD Market Outlook 2025 report notes that these constraints should deliver consistent growth in capital values, because demand continues to comfortably exceed supply. For investors who study historical trends, scarcity in prime locations has always translated into superior mid-to-long-term returns.
The fourth pillar is the national economy. Australia’s strong economic fundamentals underpin Melbourne’s property market and provide a stable backdrop for leveraged investments and mortgage refinancing strategies. As of late 2024, unemployment stood at 4.0%, well below the 10-year average of 5.3%, a sign of a resilient labor market and robust corporate health.
Sentiment has Improved as well. The ANZ-Roy Morgan consumer confidence index rose 12 points year-on-year to 86.4 in December 2024, and inflation eased to 2.8% in September 2024. Together, these trends have created a highly favorable environment for property investment and wealth accumulation.
Borrowing costs may fall further. Major banking institutions, including ANZ and NAB, have forecast interest rate cuts that are expected to lower the cost of borrowing and spur more activity in the residential property market. By December 2025, the Reserve Bank of Australia’s cash rate is anticipated to fall to between 3.35% and 3.85%, which would Improve affordability and borrowing capacity for investors entering the market.
Taken together, the findings describe a market shaped by rapid population growth, transformative infrastructure, and strong rental performance. The acute scarcity of new developments inside the CBD grid adds to the appeal, since existing apartments are exceptionally well placed for sustained capital growth. Still, building a diversified portfolio requires a clear strategy and a firm grasp of local market fundamentals. For investors who want to capitalize on these dynamics, the report advises that the time to act is now, and it recommends consulting a qualified property expert or financial advisor to secure a position in this market and work toward long-term financial independence.
A 60% apartment shortfall, a surging population, and billions of dollars in public investment all point the same way for the Melbourne CBD. What remains open for any investor is how closely those market fundamentals line up with their own long-term goals.
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