A deficit of roughly 60% is opening up in the housing supply of Melbourne’s central business district.
The City of Melbourne estimates that the CBD will require 21,600 additional dwellings between now and 2028. Projects already in the pipeline would add just 8,900.
That figure comes from “Melbourne CBD Market Outlook 2025,” a report that Urbis prepared for Far East Consortium, one of Australia’s most respected Melbourne property developers. The document examines how the local market operates, what motivates buyers, and where the economy is expected to move in 2025 and after. A local real estate professional with ten years in the industry, who has worked through several market cycles, calls the data compelling and highly actionable for investors considering commercial real estate finance or high-yield residential assets.
The report rests on four pillars. Cost and rental performance is the third, and it begins with price. CBD apartments sell for far less than detached houses, and that gap is a major source of demand. It reflects a central advantage of buying an apartment instead of land. In 2024, the median CBD apartment price was 56% below the median for a detached house, which puts apartments well within reach of first-time buyers and institutional investors alike.
Rents are moving upward as well. The median weekly rent in the CBD reached $750 in November 2024, compared with $690 in 2023, a robust 9% year-on-year increase. Vacancy averaged a remarkably low 2.4% over 2024. Newly built CBD apartments delivered gross rental yields of 4.8%, which strengthens their appeal for investors pursuing passive income through strategic property acquisition.
Supply keeps tightening at the same time. Space for new development inside the CBD grid is becoming scarcer, so existing CBD apartments are likely to see significant capital appreciation. The report notes that these constraints should produce consistent growth in capital values, because demand continues to comfortably exceed supply. For investors who study historical trends, scarcity in prime locations has always translated into superior mid-to-long-term returns.
Population is the first pillar. Urbis expects Melbourne to overtake Sydney as Australia’s largest city by 2032 and to reach 7.45 million residents by 2040. Strong Immigration has fueled a decade of steady growth, and in 2024 alone the city received 446,000 new overseas arrivals. That influx has boosted housing demand and shifted the baseline of affordability metrics across inner-city suburbs. Since the apartment pipeline cannot keep pace, the report sees room for price growth and healthy rental returns on CBD apartments. For anyone developing property portfolio management strategies, an asset in an undersupplied urban core remains one of the more dependable hedges against inflation, and a source of predictable cash flow.
Public investment is the second pillar. Major infrastructure projects are Improving Melbourne’s liveability and its appeal as an investment destination, and they carry real weight in property valuation models. The report names five of them.
Three are scheduled for the near term. The Melbourne Greenline, due in 2025, is a $224 million project to reshape public spaces along the Yarra River. It creates a 4 km route with more recreation and event opportunities, which raises the value of nearby residential property. The West Gate Tunnel Project, also due in 2025, offers drivers an alternative to the West Gate Bridge, easing congestion and tightening the link between Melbourne’s west and the CBD. The North East Link, scheduled for 2028, is the largest road project in Victoria’s history. It connects key arterial roads in the city’s north and east, shortens travel times, and supports urban growth across the region.
Two others lie further ahead. The Queen Victoria Market Renewal, set for 2029, is a $268 million revitalization of the city’s iconic market. It adds public spaces, restaurants, and activities intended to draw residents and visitors alike. The Suburban Rail Loop, due in 2035, will connect key suburbs and shorten commutes. It is also expected to lift housing demand around transport hubs such as Clayton and Sunshine.
All five projects belong to Victoria’s $107 billion infrastructure plan, which broadens Melbourne’s global appeal and supports long-term growth in property values. From a wealth advisory perspective, real estate near state-backed infrastructure keeps tenant demand steady and helps preserve capital when the economy shifts.
The fourth pillar is the national economy. Australia’s strong economic fundamentals underpin Melbourne’s property market and provide a stable backdrop for leveraged investments and mortgage refinancing strategies. As of late 2024, unemployment stood at 4.0%, well below the 10-year average of 5.3%, a sign of a resilient labor market and robust corporate health.
Sentiment has Improved too. The ANZ-Roy Morgan consumer confidence index climbed 12 points year-on-year to 86.4 in December 2024, and inflation eased to 2.8% in September 2024. Together, these trends have created a highly favorable environment for property investment and wealth accumulation.
Borrowing costs may fall further. Major banking institutions, including ANZ and NAB, have forecast interest rate cuts that are expected to reduce the cost of borrowing and spur more activity in the residential property market. By December 2025, the Reserve Bank of Australia’s cash rate is anticipated to fall to between 3.35% and 3.85%, which would Improve affordability and borrowing capacity for investors entering the market.
Taken together, the findings describe a market shaped by rapid population growth, transformative infrastructure, and strong rental performance. The acute scarcity of new developments inside the CBD grid adds to the appeal, since existing apartments are exceptionally well positioned for sustained capital growth. Even so, building a diversified portfolio requires a clear strategy and a firm grasp of local market fundamentals. For investors who want to capitalize on these dynamics, the report advises that the time to act is now, and it recommends consulting a qualified property expert or financial advisor to secure a position in this market and work toward long-term financial independence.
A 60% apartment shortfall, a surging population, and billions of dollars in public investment all point in one direction for the Melbourne CBD. The open question for any investor is how closely those market fundamentals line up with their own long-term goals.
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