Melbourne’s downtown apartment market is being pitched on a single number: a 60% shortfall in supply.
The City of Melbourne estimates that the city will need 21,600 additional dwellings by 2028, yet only 8,900 new apartments are in development.
That figure appears in the Melbourne CBD Market Outlook 2025, a report commissioned by Far East Consortium, one of Australia’s most respected Melbourne property developers. The company brought in Urbis to study how the city’s property market operates, what motivates buyers, and where the economy may be heading in 2025 and beyond. The report forecasts that Melbourne will pass Sydney by 2032 to become the largest city in Australia, and that its population will reach 7.45 million by 2040.
An advisor who circulated the material says he has spent ten years helping clients navigate Victoria’s property cycles, and that few moments have looked better for a strategic purchase. By his reading, Melbourne CBD remains among the most attractive property markets in the country, supported by population growth, major infrastructure projects, and strong rental demand.
Start with people. For ten years, Immigration has driven steady growth across Melbourne, and 446,000 new overseas arrivals settled in the city in 2024 alone. Housing demand keeps climbing as a result. For investors weighing real estate investment trusts against direct property ownership, the structural shortage described above supports long-term capital appreciation and points to genuine potential for both price growth and rental returns.
Then there is cost of entry. Apartments are cheaper than land-based homes. In 2024, the median apartment price in the CBD sat 56% below the median for a detached house, making an apartment the easier way into the market for many buyers.
Rents are moving upward too. The median weekly rent hit $750 in November 2024, up from $690 in 2023, a 9% increase year over year. Vacancy averaged a tight 2.4% through 2024, and newly built CBD apartments produced gross rental yields of 4.8%. Because space for new development inside the CBD grid is running out, existing apartments appear set for significant capital growth. The Melbourne CBD Market Outlook 2025 states that “constraints on new supply should lead to growth in capital values as demand continues to outpace supply”. Investors can shield those yields from operational swings by securing comprehensive landlord insurance and carrying out thorough property management reviews.
Public spending adds another layer. Victoria has an infrastructure plan worth $107 billion, which raises Melbourne’s global profile and underpins long-term property values. Five projects within it stand out.
The Melbourne Greenline, due in 2025, is a $224 million effort to reshape public spaces along the Yarra River. It will produce a 4-kilometer route with expanded recreation and event options.
Also due in 2025, the West Gate Tunnel Project is a major road upgrade giving drivers an alternative to the West Gate Bridge. It is expected to ease congestion and strengthen links between Melbourne’s west and the CBD.
The North East Link, scheduled for 2028, is the largest road project in Victoria. It will tie together key arterial roads in Melbourne’s north and east, shorten travel times, and support urban growth across the region.
The Queen Victoria Market Renewal, set for 2029, is a $268 million revitalization of the city’s iconic market. It brings public spaces, restaurants, and activities meant to draw residents and visitors alike.
The Suburban Rail Loop, planned for 2035, will connect key suburbs, cut commute times, and lift housing demand near transport hubs such as Clayton and Sunshine.
For investors pursuing commercial real estate loans or residential mortgages, properties near these transit corridors have consistently beaten broader market averages.
The national economy forms the backdrop. As of late 2024, unemployment stood at 4.0%, well under the 10-year average of 5.3%, a sign of a resilient economy. Consumer confidence has rebounded as well: the ANZ-Roy Morgan Index gained 12 points year over year to reach 86.4 in December 2024. Inflation cooled to 2.8% in September 2024. Together, these trends have produced a favorable climate for property investment.
Lending conditions may help further. Major banks, including ANZ and NAB, forecast interest rate cuts that should lower borrowing costs and stimulate activity in 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.
Drawing these threads together, the advisory team describes Melbourne CBD as an exceptional investment opportunity, citing rapid population growth, transformative infrastructure, and strong rental performance. With so little room left for new development inside the CBD grid, existing apartments are positioned for capital growth. Of the many factors to weigh when buying in Melbourne, location remains one of the most critical. For investors who want to capitalize on the market’s strength, the advisory team invites them to get in touch, explore curated opportunities in Melbourne CBD apartments, and schedule a one-on-one portfolio consultation.
The numbers point in one direction: a growing city, a narrowing window for new supply, and rents that keep rising. Whether those forces carry the market through 2025 and beyond is something each prospective buyer will have to decide for themselves.
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