A 60% gap between the housing Melbourne needs and the housing it is building sits at the heart of a new market study on the city’s central business district.
The report, titled “Melbourne CBD Market Outlook 2025,” was written by the research firm Urbis for Far East Consortium, one of Australia’s most respected Melbourne property developers. The developer wanted a clearer view of how the property market operates, what motivates buyers, and where the economy is heading in 2025 and beyond.
The study opens with two population forecasts. Melbourne is on track to overtake Sydney as Australia’s largest city by 2032, and its population is projected to reach 7.45 million by 2040. The analyst behind the report has spent ten years advising clients through Victoria’s dynamic real estate cycles, and says a better moment for strategic acquisition has rarely come along in that span. The assessment concludes that Melbourne CBD rests on a growing population, transformative infrastructure projects, and strong rental demand. It adds that reading the landscape correctly requires a deep understanding of local market fundamentals.
Start with demand. Immigration has fueled steady growth across the past decade, and in 2024 alone Melbourne took in 446,000 new overseas arrivals, which put added pressure on housing. Supply has not kept pace. The City of Melbourne estimates that 21,600 additional dwellings will be needed by 2028, yet the current apartment pipeline is expected to deliver only 8,900. That leaves a 60% shortfall. According to the report, a gap this size creates ample room for both price growth and rental returns, and it forms the core argument for buying apartments in Melbourne CBD. For readers weighing real estate investment trusts against direct property purchases, the author describes the undersupply as the foundation for long-term capital appreciation.
Land is a second constraint. Sites available for new development inside the CBD grid are becoming scarcer, so existing apartments are likely to see significant capital appreciation. In the report’s words, “constraints on new supply should lead to growth in capital values as demand continues to outpace supply”.
Cost of entry separates apartments from houses. CBD apartments sell for far less than detached houses, and that is one advantage of choosing an apartment over land. In 2024, the median apartment price in Melbourne CBD was 56% below the median for a detached house, which places ownership within reach of more buyers.
Rental data points the same direction. The median weekly rent in the CBD reached $750 in November 2024, compared with $690 in 2023, a 9% increase year-on-year. Vacancy stayed low, averaging 2.4% across 2024. Newly built CBD apartments have delivered strong gross rental yields of 4.8%. Comprehensive landlord insurance and thorough property management reviews can help protect those yields from operational swings.
The broader economy supplies firm footing too. As of late 2024, unemployment stood at 4.0%, well below the 10-year average of 5.3%, which the report treats as a sign of economic resilience. Consumer confidence has also Improved markedly. The ANZ-Roy Morgan Index rose 12 points year-on-year to 86.4 in December 2024. Inflation eased to 2.8% in September 2024, and combined with that rising optimism, it has created a favorable climate for property investment.
Interest rates may add further support. Major banks, including ANZ and NAB, have forecast rate cuts that are expected to lower borrowing costs and stimulate activity in the property market. The Reserve Bank of Australia’s cash rate is anticipated to fall to between 3.35% and 3.85% by December 2025. That would Improve affordability for investors using home loans or investment property loans.
Public works add another layer. Several major infrastructure projects are Improving Melbourne’s liveability and its appeal as an investment destination. The Melbourne Greenline, due in 2025, is a $224 million project that will convert public spaces along the Yarra River into a 4-kilometer route, with expanded recreation and event opportunities. Also due in 2025, the West Gate Tunnel Project is a major road upgrade that gives drivers an alternative to the West Gate Bridge, easing congestion and Improving connectivity between Melbourne’s west and the CBD. The North East Link, scheduled for 2028, is Victoria’s largest road project. It will connect key arterial roads in Melbourne’s north and east, cutting travel times and supporting urban growth across the region. 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 to attract residents and visitors. The Suburban Rail Loop, due in 2035, will link key suburbs and shorten commutes, and it is also expected to lift housing demand near transport hubs such as Clayton and Sunshine.
All of these projects fall under Victoria’s $107 billion infrastructure plan, which enhances Melbourne’s global appeal and drives long-term growth in property values. Investors seeking commercial real estate loans or residential mortgages will find, the report says, that properties near these transit corridors consistently outperform broader market averages.
The author’s conclusion is direct. Rapid population growth, transformative infrastructure, and strong rental performance make Melbourne CBD an exceptional investment opportunity. The scarcity of new development inside the CBD grid strengthens that case, since existing apartments are positioned for capital growth. Location ranks among the most critical of the many factors to weigh when buying in Melbourne. For investors who want to capitalize on the city’s robust market dynamics, the author says the time to act is now. The advisory team invites readers to get in touch today to explore curated opportunities in Melbourne CBD apartments and to book a one-on-one portfolio consultation to secure a position in this thriving market.
Three figures carry much of the report’s weight: a 60% supply shortfall, a 2.4% vacancy rate, and a $107 billion infrastructure plan. Each one feeds the same argument about where the CBD market is headed. What remains to be seen is whether new supply can ever close the distance between the 21,600 dwellings the city needs and the 8,900 now in the pipeline.
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