Melbourne’s central business district is heading toward a gap between homes needed and homes coming.
The City of Melbourne projects the CBD will require 21,600 additional dwellings by 2028. The apartment pipeline is expected to deliver just 8,900. That leaves a shortfall of 60 percent, and it is the figure at the center of a new property study called the “Melbourne CBD Market Outlook 2025.”
Urbis prepared the report for the Far East Consortium, a Melbourne-based developer widely regarded as one of the most respected in Australia. The company wanted a clearer view of how the city’s property market works, what shapes buyers’ choices, and where the economy is likely to head in 2025 and beyond.
The reading of the findings presented here comes from a real estate professional with ten years of experience in the local sector, referred to as the author. By his own account, he has watched Melbourne grow from a vibrant cultural hub into an engine of wealth creation. After working through many market cycles, he calls the report’s data compelling and highly actionable for capital allocators weighing commercial real estate finance and high-yield residential assets.
The study opens with population. Melbourne is on track to overtake Sydney as Australia’s largest city by 2032, and its population is projected to hit 7.45 million by 2040. Strong Immigration has pushed the headcount up steadily over the past decade. In 2024 alone, 446,000 people arrived from overseas. That inflow added to housing demand and shifted the baseline for affordability metrics across inner-city suburbs.
Given those trends, the author treats the 60 percent shortfall as a foundation for price growth and solid rental returns on CBD apartments. In his view, holding assets in an undersupplied urban core is among the more dependable ways to hedge against inflation and lock in predictable cash flow. He considers this an Important point when assessing property portfolio management strategies.
Cost is the second driver. The author describes the affordability of CBD apartments relative to detached houses as a key source of demand and a main advantage of choosing an apartment over land. In 2024, the median CBD apartment price was 56 percent below the median for a detached house. That gap opens the market to first-time buyers and institutional investors alike.
The rental numbers move the same way. The median weekly rent in the CBD reached $750 in November 2024, up from $690 in 2023, a year-on-year increase of 9 percent. Vacancy averaged only 2.4 percent across 2024, which supports those rents. Newly built CBD apartments have produced gross rental yields of 4.8 percent. The author says that figure strengthens their appeal for investors building passive income through strategic acquisitions.
Land is running short, too. Chances for new development inside the CBD grid are becoming rarer, and the author therefore expects existing apartments to see significant capital appreciation. According to the report, limits on new supply should deliver steady growth in capital values, provided demand stays comfortably ahead. He points to historical trends and says scarcity in prime locations has consistently translated into superior mid-to-long-term returns.
Public infrastructure spending strengthens the case. Major projects raise Melbourne’s liveability and its draw for investors, and they weigh heavily in property valuation models. Five stand out.
The Melbourne Greenline is due in 2025. The $224 million project reshapes public space along the Yarra River and creates a 4-kilometer route with more recreation and event opportunities. The author says it lifts the value of nearby residential property.
The West Gate Tunnel Project is also due in 2025. This major road upgrade gives drivers an alternative to the West Gate Bridge, eases congestion, and tightens the connection between Melbourne’s west and the CBD.
The North East Link is scheduled for 2028 and is the largest road project in Victoria. It joins key arterial roads in Melbourne’s north and east, shortens travel times, and supports urban growth across the region.
The Queen Victoria Market Renewal follows in 2029. The $268 million revitalization of the city’s iconic market adds public spaces, restaurants, and activities meant to draw residents and visitors alike.
The Suburban Rail Loop is set for 2035. This rail project links key suburbs and cuts commute times, and it is expected to raise housing demand around transport hubs such as Clayton and Sunshine.
All five projects sit within Victoria’s $107 billion infrastructure plan. The author says the plan enhances Melbourne’s global appeal and drives long-term growth in property values. From a wealth advisory perspective, he adds, real estate near state-backed infrastructure guarantees sustained tenant demand and protects capital through economic shifts.
The broader economy offers firm footing as well. The author says Australia’s strong fundamentals provide a steady backdrop for leveraged investments and mortgage refinancing strategies. In late 2024, unemployment stood at 4.0 percent, well under its 10-year average of 5.3 percent. He reads that as evidence of a resilient labor market and robust corporate health.
Sentiment has Improved. The ANZ-Roy Morgan consumer confidence index climbed 12 points from a year earlier to 86.4 in December 2024, and inflation dropped to 2.8 percent in September 2024. Together, the author says, these trends have created a highly favorable setting for property investment and wealth accumulation.
Borrowing could get easier too. Major banks, including ANZ and NAB, are forecast to cut interest rates, which should lower borrowing costs and spur more activity in the residential market. The Reserve Bank of Australia’s cash rate is expected to fall to between 3.35 percent and 3.85 percent by December 2025, Improving affordability and borrowing capacity for investors entering the market.
The author closes with his own summary. Melbourne’s CBD combines rapid population growth, transformative infrastructure, and strong rental performance, and the acute scarcity of new developments inside the CBD grid sharpens its appeal. In his assessment, existing apartments are exceptionally well positioned for sustained capital growth. He notes that a diversified portfolio demands a clear strategy and a firm grasp of local market fundamentals. For investors who want to capitalize on the city’s market dynamics, he says the time to act is now, and he recommends consulting a qualified property expert or financial advisor to secure a position and work toward long-term financial independence.
Strip away the detail and the report describes one Imbalance: a city adding residents faster than it can add apartments. Whether that Imbalance becomes lasting returns will hinge on how Melbourne’s growth and the central bank’s rate path unfold in the years ahead.
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