Twenty-one thousand six hundred.
That is how many additional dwellings the City of Melbourne says its central business district will need by 2028. The current pipeline holds only 8,900 new units, so supply sits 60% below projected need. Any investor weighing a Melbourne apartment has reason to look hard at that gap.
The demand behind it is easy to trace. Melbourne is on track to overtake Sydney as Australia’s largest city by 2032, and forecasts put its population at 7.45 million by 2040. Immigration has fueled most of that growth over the past decade, and the pace has not slowed. In 2024 alone, 446,000 new arrivals from overseas settled in the city, putting more pressure on a housing market that was already tight.
Against that backdrop, Far East Consortium, one of the most respected property developers in Melbourne, commissioned Urbis to produce a report titled “Melbourne CBD Market Outlook 2025.” The company wanted a clearer picture of how the city’s property market works, what drives buyers, and where the economy is heading in 2025 and beyond. The report finds that the Melbourne CBD remains one of the most attractive property markets in the country. It rests that finding on three supports: a growing population, major infrastructure projects, and strong rental demand.
The supply shortfall anchors the first of those supports. One analyst, who says he has spent a decade studying property cycles, tells his clients that scarce supply underlies long-term capital appreciation. When demand outstrips supply by a margin this wide, he argues, urban real estate tends to command premium valuations.
Government spending is the second support. A series of large projects is Improving daily life in the city while making it more appealing to investors, and they arrive on a staggered schedule.
The Melbourne Greenline and the West Gate Tunnel Project are both due in 2025. The Greenline is a $224 million effort to transform public spaces along the Yarra River, producing a 4-kilometer route with more room for recreation and events. The West Gate Tunnel Project is a major road upgrade that offers drivers an alternative to the West Gate Bridge. It is designed to ease congestion and tighten the connection between Melbourne’s west and the CBD.
The North East Link follows in 2028. It is the largest road project in Victoria, and it will join key arterial roads in the north and east, shortening travel times and supporting urban growth across that part of the city.
The Queen Victoria Market Renewal is slated for 2029. This $268 million revitalization of the city’s iconic market adds public spaces, restaurants, and activities for residents and visitors alike.
Furthest out is the Suburban Rail Loop, set for 2035. It will link key suburbs and cut commute times, and it is expected to raise housing demand around transport hubs such as Clayton and Sunshine.
All of these projects fall under Victoria’s $107 billion infrastructure plan, which lifts Melbourne’s global profile and drives long-term growth in property values. The same analyst says that, in his experience, values rise faster in corridors directly touched by government capital spending.
The third support is the product itself, and affordability is a large part of its appeal. It is one edge that apartments hold over land. In 2024, the median price of a Melbourne CBD apartment was 56% below that of a detached house, which put apartments within reach of a wider pool of buyers.
Rental data points in the same direction. Median weekly rent in the CBD climbed to $750 in November 2024, up from $690 in 2023, a 9% increase year on year. The vacancy rate averaged just 2.4% across 2024, and newly built CBD apartments delivered gross rental yields of 4.8%.
Meanwhile, development sites inside the CBD grid are becoming harder to find, which means existing apartments are likely to see significant capital appreciation. The report says as much, stating that “constraints on new supply should lead to growth in capital values as demand continues to outpace supply”.
The wider economy backs up the local picture, since Australia’s economic fundamentals underpin the Melbourne market. As of late 2024, unemployment stood at 4.0%, well below the 10-year average of 5.3%. Consumer confidence has recovered as well. The ANZ-Roy Morgan Index rose 12 points year on year to reach 86.4 in December 2024. Inflation eased to 2.8% in September 2024. Taken together, those trends have produced a favorable climate for property investment.
Interest rates could add another layer of support. Major banks, including ANZ and NAB, forecast rate cuts that should reduce borrowing costs and stimulate activity in the property market. The Reserve Bank of Australia’s cash rate is expected to fall to between 3.35% and 3.85% by December 2025, which would Improve affordability for investors looking to secure a Melbourne CBD apartment.
Still, location counts as much as any of these numbers. Buyers in Melbourne face many variables, and choosing the right location is among the most critical decisions. Rapid population growth, transformative infrastructure, and strong rental performance combine to make the CBD an exceptional investment opportunity. The scarcity of new development inside the grid only strengthens the case for existing apartments.
Everything in the report returns to one comparison: 21,600 dwellings needed against 8,900 planned. Whether that distance narrows or widens will shape Melbourne’s property market for years to come, alongside a rising population, heavy public investment, and firm rents.
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