Start with the shortfall.
The City of Melbourne says its central business district will need 21,600 additional dwellings by 2028, yet only 8,900 new units are in the pipeline. That leaves supply 60% below projected need, a gap any investor considering a Melbourne apartment has reason to study closely.
Population growth explains why the gap is so wide. Forecasts show Melbourne passing Sydney as Australia’s largest city by 2032, with a projected 7.45 million residents by 2040. Immigration has driven most of the growth over the past decade and shows no sign of slowing. In 2024 alone, 446,000 new arrivals from overseas settled in the city, adding pressure to a housing market that was already tight.
That context shaped a report called “Melbourne CBD Market Outlook 2025,” which Far East Consortium, one of Melbourne’s most respected property developers, commissioned from Urbis. The developer wanted a sharper view of how the city’s property market functions, what motivates buyers, and where the economy is headed in 2025 and beyond. The report concludes that the Melbourne CBD remains among the most attractive property markets in the country, and it builds that conclusion on three supports: a growing population, major infrastructure projects, and strong rental demand.
The supply shortfall anchors the first support. One analyst, who says he has spent a decade studying property cycles, tells his clients that limited supply underpins long-term capital appreciation. When demand exceeds supply by a margin this large, he argues, urban real estate tends to command premium valuations.
Public spending is the second support, and it arrives in stages. A series of large projects is Improving daily life in the city and making it more appealing to investors.
Two projects are due in 2025. The Melbourne Greenline is a $224 million effort to transform public spaces along the Yarra River, creating a 4-kilometer route with more room for recreation and events. The West Gate Tunnel Project is a major road upgrade that gives drivers an alternative to the West Gate Bridge. It is designed to ease congestion and tighten the link between Melbourne’s west and the CBD.
In 2028, the North East Link is scheduled to open. As the largest road project in Victoria, it will join key arterial roads in the north and east, shorten travel times, and support urban growth across that part of the city.
The Queen Victoria Market Renewal follows in 2029. This $268 million revitalization of the city’s iconic market will add public spaces, restaurants, and activities for residents and visitors alike.
The Suburban Rail Loop is the most distant of the group, set for 2035. It will connect key suburbs and cut commute times, and it is expected to lift housing demand around transport hubs such as Clayton and Sunshine.
All of these projects sit within Victoria’s $107 billion infrastructure plan, which raises Melbourne’s global profile and drives long-term growth in property values. The same analyst says that, in his experience, values climb faster in corridors directly touched by government capital spending.
The third support is the product itself, and affordability is a big part of its appeal. This is one advantage 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 figures point the same way. Median weekly rent in the CBD rose 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 getting harder to find, so 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 national economy reinforces the local picture, because Australia’s economic fundamentals underpin the Melbourne market. As of late 2024, unemployment stood at 4.0%, well under the 10-year average of 5.3%. Consumer confidence has also recovered: the ANZ-Roy Morgan Index gained 12 points year on year to reach 86.4 in December 2024. Inflation eased to 2.8% in September 2024. Together, those trends have created a favorable climate for property investment.
Interest rates may add further support. Major banks, including ANZ and NAB, forecast rate cuts that should lower 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 seeking a Melbourne CBD apartment.
Even so, location counts as much as any of these figures. 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.
In the end, the report comes down to a single comparison: 21,600 dwellings needed against 8,900 planned. Whether that distance narrows or widens will shape Melbourne’s property market for years, alongside a rising population, heavy public investment, and firm rents.
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