Far East Consortium, one of Australia’s most respected Melbourne property developers, commissioned Urbis to study the city’s central market.
The resulting report, “Melbourne CBD Market Outlook 2025,” examines how the market functions, what shapes buyer behavior, where the structural shortage lies, and which broader economic forces are underpinning Melbourne real estate. Its conclusion is that rapid population growth, major infrastructure projects, and strong rental demand make the Melbourne CBD one of the country’s most attractive property markets for investors seeking long-term capital appreciation and sustainable wealth creation. The number at the center of it all: a 60% deficit in housing supply by 2028.
That deficit comes from a simple comparison. The City of Melbourne estimates the city will need 21,600 additional dwellings by 2028, yet only 8,900 new apartments are expected to be completed over that period. The report reads the gap as a signal of potential for sustained price growth and solid rental returns on CBD apartments. Scarcity paired with population pressure, it says, is exactly what experienced buyers seek when assembling high-yield portfolios.
The population figures explain where that pressure originates. In 2024 alone, Melbourne took in 446,000 new overseas arrivals. Urbis projects that the city will overtake Sydney as Australia’s largest by 2032, and that its population will hit 7.45 million by 2040. Across the past decade, growth has stayed strong and steady, driven mainly by international Immigration and by people relocating from other states.
Public investment is the second pillar of the report’s case. A series of major projects is reshaping the city, and the report ties each one to Melbourne’s liveability, economic resilience, and lasting appeal as an investment destination.
Two projects are due in 2025. The Melbourne Greenline, a $224 million undertaking, turns public space along the Yarra River into a scenic 4-kilometer route, creating new openings for recreation, lifestyle activity, and commercial events. The West Gate Tunnel Project offers drivers a dependable alternative to the heavily congested West Gate Bridge, and it Improves freight movement and logistical links between Melbourne’s western industrial corridors and the CBD.
The North East Link follows in 2028. It is Victoria’s largest integrated road engineering project, connecting key arterial routes across Melbourne’s north and east, cutting travel times, and supporting coordinated urban growth in the region. In 2029, the Queen Victoria Market Renewal is scheduled to deliver a $268 million revitalization of one of the city’s iconic cultural hubs, with new public plazas, dining districts, and community activities meant to attract permanent residents and international tourists alike. The final item on the timeline is the Suburban Rail Loop, targeted for 2035. This multi-billion-dollar rail initiative links key middle-ring suburbs, shortens commutes, and is expected to generate heavy housing demand near high-density transport hubs such as Clayton and Sunshine.
Together, these projects form the core of Victoria’s $107 billion infrastructure pipeline, which strengthens Melbourne’s global competitiveness and directly supports long-term growth in property values. For strategic investors, the report states, buying near major infrastructure nodes is a proven route to above-average capital gains.
Pricing and rents show why apartments draw particular attention. Affordability limits in traditional housing markets have altered how buyers think, and CBD apartments cost far less than detached suburban homes. In 2024, the median apartment price in the Melbourne CBD sat roughly 56% below that of a detached house. High-rise units therefore give first-time buyers and institutional investors a much more accessible entry point, and they illustrate one of the core financial advantages an apartment holds over standalone land.
Inner-city rents climbed during the same period. Median weekly rent rose from $690 a year earlier to $750 in late 2024, a 9% year-on-year increase. Conditions are tight, with vacancy rates averaging about 2.4%. Newly built CBD apartments have consistently delivered gross rental yields of 4.8%, which strengthens their cash flow appeal in an inflationary climate.
Limited supply also brightens the outlook for existing stock. Room for new development inside the tightly held CBD grid is shrinking, which positions existing apartments for faster capital appreciation. The Melbourne CBD Market Outlook 2025 observes that strict regulatory and geographical constraints on new supply will push capital values higher, because rental and buyer demand will outstrip available inventory.
The wider economy lends further support. Macroeconomic indicators shape the health of both commercial and residential property, and Australia’s economic fundamentals remain resilient. Unemployment holds steady at 4.0%, comfortably below the 10-year historical average of 5.3%, which points to a robust labor market. Consumer confidence has recovered too: the ANZ-Roy Morgan Index gained 12 points year-on-year to reach 86.4, reflecting Improved sentiment among households and business owners. With inflation cooling to 2.8%, conditions have become more favorable for property purchases and leveraged wealth building.
Monetary policy may add momentum. Major financial institutions, including ANZ and NAB, anticipate policy easing, which is expected to lower borrowing costs and bring fresh liquidity into the residential market. The Reserve Bank of Australia’s cash rate is projected to ease toward a range of 3.35% to 3.85%, which would expand purchasing power and lower hurdles for active market participants.
Taken as a whole, the Melbourne CBD combines rapid demographic expansion, generational infrastructure spending, and resilient rental performance. That mix, the report argues, positions it as an elite asset class for focused investors. The acute scarcity of new developments within the central business district grid reinforces its long-term characteristics, helping well-located residential assets stay insulated from oversupply risk while capturing steady upside. Choosing the right asset in the right pocket matters, and the report recommends consulting a qualified property strategist or financial advisor before committing capital.
Every finding in the Urbis study traces back to a single tension: a city adding residents and rental demand faster than it can build apartments. Set against a 60% supply deficit, that mismatch is the central fact for anyone following Melbourne’s property market. As 2028 draws closer, one question remains open: will construction ever catch up with the people arriving?
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