Twenty-one thousand six hundred dwellings.
That is how many additional homes the City of Melbourne says the central business district needs by 2028. The apartment pipeline holds only 8,900 new units, which leaves a shortfall of 60%. This single gap sits at the center of a report titled “Melbourne CBD Market Outlook 2025,” which concludes that apartments in the heart of the city are positioned for strong price growth and solid rental returns.
Urbis wrote the report for Far East Consortium, one of Australia’s most respected developers in Melbourne. The developer wanted a clearer picture of how the city’s property market works, what motivates buyers, and where the economy is heading in 2025 and beyond. According to the report, rapid population growth, major infrastructure under construction, and robust rental demand make Melbourne one of the most attractive property markets in the country. Any investor entering it, the report says, should understand why CBD apartments have performed so well as an asset class.
Population is the first driver. The report projects that Melbourne will overtake Sydney as Australia’s largest city by 2032 and reach 7.45 million residents by 2040. Immigration has fueled steady growth for a decade, and in 2024 alone, 446,000 new arrivals came to Melbourne from overseas. Each of them adds to the demand for housing. A property analyst with ten years of experience studying market cycles describes scarce supply as the ultimate foundation of long-term capital appreciation. When demand outstrips supply by a margin this wide, the analyst says, city real estate tends to command premium valuations.
Public spending is the second. Victoria has committed to a $107 billion infrastructure plan, and its projects raise both Melbourne’s livability and its appeal to investors. The same analyst says that, in their experience, property values rise faster in corridors directly touched by public capital spending. Five projects stand out.
The Melbourne Greenline, due in 2025, is a $224 million effort to transform public space along the Yarra River. It creates a 4-kilometer route, with Improved recreation and new opportunities for events.
The West Gate Tunnel Project is also due in 2025. This major road upgrade gives drivers an alternative to the West Gate Bridge, and it is meant to ease congestion and Improve links between Melbourne’s west and the CBD.
The North East Link, scheduled for 2028, is the largest road project in Victoria’s history. It will join key arterial roads in the city’s north and east, shorten travel times, and support urban growth across the region.
The Queen Victoria Market Renewal, set for 2029, is a $268 million revitalization of one of Melbourne’s best-known landmarks. New public spaces, restaurants, and activities are intended to draw residents and visitors alike.
The Suburban Rail Loop, planned for 2035, will link key suburbs and cut commute times. It is also expected to lift housing demand near transport hubs such as Clayton and Sunshine.
Price is another part of the case. Buying an apartment rather than land carries a cost advantage, since apartments in the CBD sell for far less than detached houses. In 2024, the median apartment price in the Melbourne CBD was 56% below the median for a detached house, which made apartments the more accessible option for many buyers.
Rental figures point in the same direction. The median weekly rent in the CBD reached $750 in November 2024, up from $690 in 2023, a year-on-year increase of 9%. Vacancy stayed low, averaging 2.4% through 2024. Newly built CBD apartments delivered gross rental yields of 4.8%, which strengthens their appeal for investors.
Supply, meanwhile, runs into a physical limit. Space for new development inside the CBD grid is getting harder to find, so existing apartments are likely to see significant capital appreciation. The report states that “constraints on new supply should lead to growth in capital values as demand continues to outpace supply”.
The national economy adds further support. Australia’s fundamentals are strong, with unemployment at 4.0% in late 2024, well below the 10-year average of 5.3%. Consumer confidence has recovered as well: the ANZ-Roy Morgan Index rose 12 points over the year to 86.4 in December 2024. Inflation cooled to 2.8% in September 2024. Together, these conditions create a favorable climate for property investment.
Borrowing costs may also tilt toward buyers. Major banks, including ANZ and NAB, forecast rate cuts that should lower loan costs and stimulate more 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%, which would Improve affordability for investors weighing Melbourne CBD apartments.
Taken together, the findings describe a market where fast population growth, large public works, and strong rental performance converge, while limited room for new construction inside the CBD grid keeps existing apartments positioned for capital growth. Location remains one of the most critical factors for any buyer in Melbourne.
Everything returns to that one mismatch: 21,600 dwellings needed, 8,900 in the pipeline. How long can a 60% shortfall in supply last before it shows up in prices and rents?
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