A shortfall of 60% sits at the center of the Melbourne CBD Market Outlook 2025.
The City of Melbourne estimates that 21,600 additional dwellings will be needed by 2028. The apartment pipeline, meanwhile, contains only 8,900 new units. That is the sharpest finding in a report that also projects Melbourne to overtake Sydney as Australia’s largest city by 2032, and to reach a population of 7.45 million by 2040.
Far East Consortium, a developer with a strong reputation in the Melbourne market, commissioned the study, and the research firm Urbis wrote it. Its scope covered three areas: the mechanics of the city’s property market, the factors that shape buyers’ decisions, and the direction of the economy in 2025 and beyond.
The commentary on the findings comes from an author with ten years in local real estate, including several market cycles. He describes the data as compelling and highly actionable for disciplined investors who are comparing commercial real estate finance with high-yield residential assets. In his view, Melbourne has moved past its identity as a lively cultural center and become an engine of wealth creation. Population growth, large-scale infrastructure projects, and healthy rental demand together offer property investors long-term security and strong capital appreciation, he says.
He starts with population. Immigration has driven steady growth over the past decade, and in 2024 alone, 446,000 new arrivals came to the city from overseas. That inflow keeps housing demand high and has shifted the baseline of housing affordability across inner-city suburbs. With supply lagging, he sees room for price growth and solid rental returns on CBD apartments. For anyone building property portfolio management strategies, he considers a purchase in an undersupplied urban core among the most dependable hedges against inflation, and a way to lock in predictable cash flow.
His second theme is public spending. Major infrastructure projects make Melbourne more livable and a more attractive place to invest, and they carry real weight in property valuation models. The report highlights five.
The Melbourne Greenline is due in 2025. This $224 million project will reshape public space along the Yarra River and open a route of 4 kilometers with expanded recreation and event options, which in turn lifts the value of neighboring residential property. The West Gate Tunnel Project is also scheduled for 2025. The road upgrade gives drivers an alternative to the West Gate Bridge, eases congestion, and Improves connections between Melbourne’s west and the CBD.
The North East Link follows in 2028. It is the largest road project in Victoria’s history, connecting 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 is set for 2029. That $268 million revitalization of the iconic market will bring new public spaces, restaurants, and activities that draw residents and visitors alike.
The Suburban Rail Loop is the furthest out, scheduled for 2035. It will link key suburbs and shorten commutes, and it is expected to boost housing demand around transport hubs such as Clayton and Sunshine.
All five projects fall under Victoria’s $107 billion infrastructure plan, which strengthens Melbourne’s global appeal and drives long-term growth in property values. From a wealth advisory standpoint, the author says, owning real estate near state-backed infrastructure secures lasting tenant demand and protects capital through economic shifts.
Price is the next factor. Affordability relative to detached housing is a core driver of demand and a major benefit of buying an apartment rather than land, and CBD apartments hold a clear cost advantage on that measure. In 2024, the median apartment price in the Melbourne CBD was 56% below the median for a detached house. That puts apartments within much easier reach of first-time buyers and institutional investors alike.
Rental data points the same way. The median weekly rent in the CBD reached $750 in November 2024, up from $690 in 2023, a robust 9% increase year-on-year. Vacancy remained very low, averaging 2.4% across 2024. Newly built CBD apartments have delivered gross rental yields of 4.8%, making them more attractive to investors who want to optimize passive income through strategic acquisitions.
Scarcity reinforces all of this. Opportunities for new development inside the CBD grid are running out, so existing Melbourne CBD apartments are likely to see significant capital appreciation. According to the Melbourne CBD Market Outlook 2025, limits on new supply should produce consistent growth in capital values, with demand continuing to comfortably outpace supply. For investors who study historical trends, scarcity in prime locations has always translated into superior mid-to-long-term returns.
The national economy provides stable footing as well. Australia’s strong fundamentals underpin Melbourne’s property market and offer a steady backdrop for leveraged investments and mortgage refinancing strategies. As of late 2024, unemployment stood at 4.0%, well below its 10-year average of 5.3%, a sign of a resilient labor market and robust corporate health.
Sentiment has Improved too. The ANZ-Roy Morgan Index climbed 12 points year-on-year to 86.4 in December 2024, and inflation fell to 2.8% in September 2024. Together, these trends have created a highly favorable environment for property investment and wealth accumulation.
Borrowing costs are expected to ease. Major banking institutions, including ANZ and NAB, have forecast interest rate cuts, which should lower the cost of borrowing and stimulate 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%. That would further Improve affordability and borrowing capacity for smart investors entering the market.
The author gathers this evidence into three pillars: rapid population growth, transformative infrastructure, and strong rental performance. The acute scarcity of new development inside the CBD grid sharpens the appeal and leaves existing Melbourne CBD apartments well positioned for sustained capital growth. He notes that building a diversified investment portfolio means working through the complexities of property acquisition, which calls for a clear strategy and a grasp of local market fundamentals. For investors who want to capitalize on Melbourne’s robust market dynamics, he argues, the time to act is now. His advice is to explore the potential of Melbourne CBD apartments and to consult a qualified property expert or financial advisor. That, he says, is how to secure a position in this thriving market and take the next step toward long-term financial independence.
Reduced to its essentials, the report’s figures describe one picture: 21,600 dwellings needed against 8,900 in the pipeline, a vacancy rate of 2.4%, and a population heading toward 7.45 million by 2040. How investors weigh those numbers against their own goals is the question that remains.
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