Roughly 21,600 additional dwellings will be needed in the City of Melbourne by 2028, according to the city’s own estimate.
Only 8,900 new apartments are expected to arrive in that window. The shortfall, close to 60%, is the central fact behind the argument that the central business district offers a strong case for property investment.
The figure appears in the “Melbourne CBD Market Outlook 2025,” a report that Urbis prepared for Far East Consortium, one of Australia’s most respected Melbourne developers. The company commissioned it to understand how the local property market works, what shapes buyer behavior, and where the economy is likely to go in 2025 and beyond. The analyst who wrote the commentary on the report has spent the past decade in the local real estate sector and has watched several market cycles pass. He describes the data as compelling and highly actionable for investors interested in commercial real estate finance and high-yield residential assets. In his view, Melbourne has grown from a lively cultural hub into a powerhouse of wealth generation, and its rising population, large infrastructure projects, and strong rental demand support long-term security and capital appreciation.
Population growth drives the shortage. The report projects that Melbourne will overtake Sydney as Australia’s largest city by 2032 and reach 7.45 million residents by 2040. Strong Immigration has powered that expansion for the past decade. In 2024 alone, 446,000 new overseas arrivals settled in the city, which added considerably to housing demand and shifted the affordability baseline across inner-city suburbs. Set against 21,600 needed dwellings and 8,900 planned apartments, the author argues, that pressure points to potential price growth and strong rental returns in the CBD. On strategy, he contends that buying in an undersupplied urban core ranks among the most dependable hedges against inflation and offers a reliable path to predictable cash flow.
Public investment reinforces the picture. Victoria has committed to a $107 billion infrastructure plan, which the author says Improves Melbourne’s liveability, strengthens its global appeal, and drives long-term growth in property values. Five projects stand out, and they arrive on different timelines.
The Melbourne Greenline, a $224 million project due in 2025, will reshape public spaces along the Yarra River and create a 4 kilometer route with more recreation and event opportunities. The author says it lifts the value of neighboring residential property. The West Gate Tunnel Project, also due in 2025, is a major road upgrade that gives drivers an alternative to the West Gate Bridge. It eases congestion and Improves the link between Melbourne’s west and the CBD. Scheduled for 2028, the North East Link 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 in that region. Then comes 2029, when the $268 million Queen Victoria Market Renewal is set to revitalize the iconic market with new public spaces, restaurants, and activities that draw residents and visitors. Furthest out, in 2035, the Suburban Rail Loop will connect key suburbs, shorten commutes, and boost housing demand near transport hubs such as Clayton and Sunshine.
From a wealth advisory standpoint, the author concludes that real estate near state-backed infrastructure supports steady tenant demand and protects capital through economic shifts.
Cost is a separate advantage. CBD apartments sell for far less than detached houses, and the author names that gap as one of the main benefits of buying an apartment rather than land. In 2024, the median apartment price in the CBD stood 56% below the median for a detached house. That makes apartments a much more accessible option for first-time buyers and institutional investors alike.
Rental data moves in the same direction. Median weekly rent in the CBD reached $750 in November 2024, up from $690 in 2023, a 9% increase year over year. Vacancy stayed remarkably low, averaging 2.4% across 2024. Newly built CBD apartments have delivered gross rental yields of 4.8%, which strengthens their appeal for investors seeking passive income through strategic acquisitions.
Meanwhile, the CBD grid is running out of room for new construction. The report says these supply constraints should produce consistent growth in capital values, because demand keeps comfortably outpacing supply, and that existing apartments are therefore likely to see significant capital appreciation. The author adds that for investors studying historical trends, scarcity in prime locations has always translated into superior mid-to-long-term returns.
The broader economy provides firm footing, including for leveraged investments and mortgage refinancing strategies. Unemployment stood at 4.0% in late 2024, well below the 10-year average of 5.3%, which the author reads as a sign of a resilient labor market and robust corporate health. Consumer confidence has recovered as well: the ANZ-Roy Morgan Index rose 12 points year over year to 86.4 in December 2024. Inflation fell to 2.8% in September 2024. Taken together, these readings create what the author calls a highly favorable environment for property investment and wealth accumulation.
Interest rates may add to the momentum. Major banking institutions, including ANZ and NAB, forecast rate cuts that should lower borrowing costs and stimulate more activity in the residential 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 and borrowing capacity for investors entering the market.
Pulling these threads together, the author views Melbourne’s CBD as an exceptional opportunity: rapid population growth, transformative infrastructure, and strong rental performance, combined with scarce new development inside the CBD grid. That scarcity leaves existing apartments well placed for sustained capital growth. Even so, he stresses that building a diversified portfolio requires a clear strategy and a grasp of local market fundamentals, and he advises consulting a qualified property expert or financial advisor before committing.
Everything here traces back to one Imbalance. A city expected to overtake Sydney by 2032 is adding far fewer apartments than it needs, while rents, employment, and consumer confidence all trend upward. Whether that gap narrows is what investors in this market will be watching most closely.
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