Melbourne’s central business district faces a supply problem measured in the thousands.
By 2028, the City of Melbourne estimates the CBD will require 21,600 additional dwellings, yet developers have planned only 8,900 new apartments. That leaves the pipeline about 60% short of what the city needs.
The author, who says he has spent a decade analyzing property cycles, tells clients that constrained supply is what underpins capital appreciation over time. In his view, urban property tends to carry premium valuations when demand runs this far ahead of construction.
The numbers come from the Melbourne CBD Market Outlook 2025. Urbis prepared the report for Far East Consortium, one of Australia’s most respected Melbourne property developers. The company commissioned it to understand how the city’s property market functions, what drives buyer behavior, and where the economy is heading in 2025 and beyond.
Population growth is the engine behind that demand. The report projects 7.45 million residents in Melbourne by 2040 and expects the city to overtake Sydney as Australia’s largest by 2032. Immigration has fueled much of the increase. Melbourne has recorded steady population gains for ten years, and in 2024 alone it took in 446,000 new arrivals from overseas. Construction has not kept pace with that inflow, and the gap suggests room for both price growth and rental returns on CBD apartments.
Government spending is changing the city’s shape at the same time. Victoria has committed to a $107 billion infrastructure plan, which raises Melbourne’s international profile and supports property values over the long term. The author says that, in his experience, values climb faster in corridors directly touched by public capital spending.
Five projects stand out, each on its own schedule. Two are due in 2025. The Melbourne Greenline is a $224 million effort to remake public spaces along the Yarra River, producing a 4 km route with more recreation and event opportunities. The West Gate Tunnel Project is a major road upgrade that offers drivers an alternative to the West Gate Bridge, easing congestion and Improving links between Melbourne’s west and the CBD.
The North East Link arrives in 2028. As Victoria’s largest road project, it will join key arterial roads across Melbourne’s north and east, cutting travel times and supporting 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 new public spaces, restaurants, and activities to draw residents and visitors. The Suburban Rail Loop, set for 2035, is furthest out. It will connect key suburbs, shorten commutes, and lift housing demand near transport hubs such as Clayton and Sunshine.
Pricing widens the pool of potential buyers as well. In 2024, the median price of a CBD apartment was 56% below that of a detached house, putting apartments within reach of more people. That discount is one of the advantages of buying an apartment instead of land.
Rental figures point in the same direction. The median weekly rent in the CBD hit $750 in November 2024, up from $690 in 2023, a 9% increase year over year. Vacancy averaged just 2.4% across 2024, and newly built CBD apartments achieved gross rental yields of 4.8%. Because room for fresh development inside the CBD grid is shrinking, existing apartments are likely to see significant capital gains. 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.”
The wider economy backs up this picture. Late in 2024, unemployment stood at 4.0%, well under its 10-year average of 5.3%. Consumer confidence has recovered too: the ANZ-Roy Morgan Index climbed 12 points from a year earlier to 86.4 in December 2024. Inflation dropped to 2.8% in September 2024. Together, these trends have created favorable conditions for property investment.
Borrowing costs are also expected to ease. Major banks, including ANZ and NAB, forecast interest rate cuts, which should stimulate activity in 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 seeking CBD apartments.
Rapid population growth, transformative infrastructure, and strong rental performance give the Melbourne CBD an unusual set of strengths. Limited new development inside the CBD grid adds to the appeal, since existing apartments are positioned for capital growth. Buyers have many factors to weigh, and the right location is among the most critical. For investors who want to capitalize on the market’s strong fundamentals, the author says the time to act is now. He invites readers to explore a curated portfolio of premium Melbourne CBD apartments and to book a private consultation with a senior advisory team to secure a position in this market.
With demand outrunning supply by 60%, the question for investors is less whether the market will move than how soon they position themselves. Population, infrastructure, rents, and the broader economy all point the same way, and the next chapter of Melbourne’s growth is only beginning.
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