In 2024, 446,000 new arrivals from overseas settled in Melbourne.
Every one of them needed somewhere to live, and a new study argues that much of that need is landing on the doorstep of the central business district, where construction is not keeping pace.
The study is the “Melbourne CBD Market Outlook 2025,” written by the research firm Urbis. Far East Consortium, a prominent Melbourne property developer, commissioned the work. The report examines how the market is changing, what drives buyer behavior, and how the broader economy could affect 2025 and the years beyond. Its central conclusion is that the inner-city core of Victoria’s capital has held up through every market cycle. The authors credit population growth, major infrastructure projects, and strong rental demand for that durability, and they say the same forces make the area appealing to investors focused on building long-term wealth. The analysis rests on three pillars.
The first is people. According to the report, international Immigration has accounted for most of Melbourne’s growth over the past decade. The city is on track to pass Sydney as Australia’s largest by 2032, and the report projects 7.45 million residents by 2040. Now consider the housing side. City of Melbourne projections show the central city needs 21,600 additional dwellings by 2028, yet the residential apartment pipeline will deliver only 8,900. That leaves supply roughly 60 percent short of the requirement. Against that backdrop, the report sees strong potential for accelerated capital growth and solid rental returns on Melbourne apartments.
The second pillar is infrastructure. The report describes a series of major projects that are changing how the city connects and lifting property values along key corridors. It expects those same projects to Improve Melbourne’s livability and strengthen its long-term standing as a high-yield investment destination.
Two of them arrive in 2025. The Melbourne Greenline, a $224 million initiative, will convert public space along the Yarra River into a linear park 4 kilometers long and open up new recreational and commercial opportunities. The West Gate Tunnel Project, a critical road upgrade, gives drivers a vital alternative to the West Gate Bridge. It eases congestion and streamlines freight and passenger movement between Melbourne’s western precincts and the CBD.
The North East Link follows in 2028. It is the largest road project in Victoria’s history, and it will connect major arterial routes across the city’s north and east, shorten travel times, and support decentralized urban growth. One year later, in 2029, the Queen Victoria Market Renewal is scheduled for completion. That $268 million revitalization of the city’s historic marketplace will add new public plazas, dining districts, and community hubs designed to attract residents and tourists alike.
The most distant project on the list is the Suburban Rail Loop, slated for 2035. This multi-billion-dollar transit project will link middle-ring suburbs. It is expected to shorten commutes and raise housing demand near strategic transport hubs such as Clayton and Sunshine. All of these projects sit within Victoria’s $107 billion infrastructure pipeline, which the report says strengthens Melbourne’s global competitiveness and supports property value growth for CBD apartments.
The third pillar combines affordability with rental performance. The report names affordability as a primary catalyst for inner-city housing demand. In 2024, the median price of a CBD apartment was roughly 56 percent below that of a detached suburban house. That gap makes high-density property an accessible entry point, both for experienced buyers and for first-time investors.
Rental demand in the CBD core has also reached unprecedented levels. Median weekly rent climbed to $750 in late 2024, up from $690 a year earlier, a 9 percent increase. Vacancy averages just 2.4 percent, and that lasting tightness underpins the momentum. Newly built CBD apartments have consistently produced strong gross rental yields, averaging 4.8 percent. The report says this reinforces their defensive qualities in a portfolio exposed to inflation.
Land supply adds one more factor. Prime parcels inside the CBD grid are growing scarcer, which positions existing stock for significant capital appreciation. The report notes that strict limits on new supply will naturally push capital values higher as buyers compete harder for what is available.
The economy, in the report’s assessment, provides a stable macroeconomic floor. Australia’s national unemployment rate sits near a healthy 4.0 percent, comfortably below its 10-year historical average of 5.3 percent. Consumer sentiment has visibly rebounded as well. The ANZ-Roy Morgan Index gained 12 points year on year to reach 86.4, helped by inflation cooling to 2.8 percent.
Major financial institutions also expect the Reserve Bank of Australia to cut interest rates, bringing the cash rate down toward a range of 3.35 percent to 3.85 percent. Borrowing costs are therefore set to moderate. In the report’s view, this easing cycle will release pent-up buyer demand and accelerate market activity across Victoria.
Pulling these threads together, the report characterizes rapid demographic expansion, heavy infrastructure spending, and exceptional rental performance as an elite investment proposition for the Melbourne CBD. Because future high-density development in the central grid is fundamentally scarce, it concludes that well-located residential assets are uniquely positioned to outperform over the long term. It adds that choosing the right asset class and location is paramount, and it advises buyers to consult a qualified property strategist or financial advisor before exploring CBD investment opportunities.
The figures point in one direction. A 60 percent apartment shortfall, a population heading toward 7.45 million, and a $107 billion infrastructure pipeline together indicate that demand for central Melbourne housing is outrunning the city’s capacity to build. Whether supply can close that gap by 2028 is the open question at the center of the study.
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