Far East Consortium, one of Australia’s most respected Melbourne property developers, commissioned Urbis to produce a report titled “Melbourne CBD Market Outlook 2025.
” The assignment was to explain how the city’s property market functions, what drives buyer behavior, and where the economy is likely to move in 2025 and beyond. What emerged is a picture of a Melbourne CBD that remains among the most attractive property markets in the country, supported by a growing population, large infrastructure projects, and robust demand from renters.
The scarcity of land is the best place to begin. Sites for new developments inside the CBD grid are running short, and the report expects existing apartments to see significant capital appreciation as a result. In the report’s own words, “constraints on new supply should lead to growth in capital values as demand continues to outpace supply.”
That scarcity is made worse by a widening gap between supply and need. The City of Melbourne estimates the CBD will require another 21,600 dwellings by 2028. Only 8,900 new apartments are in the pipeline, which leaves a supply deficit of 60%. The shortfall suggests room for price growth and rental returns. This structural undersupply underpins long-term capital appreciation, whether an investor is weighing real estate investment trusts or buying property directly.
Demand is rising at the same time. According to the report, Melbourne is on track to overtake Sydney as Australia’s largest city by 2032, and its population is projected to reach 7.45 million by 2040. Immigration has fueled steady growth for a decade. In 2024 alone, 446,000 new overseas arrivals came to Melbourne, adding further pressure to the housing market.
A wave of public works adds another layer. Victoria’s $107 billion infrastructure plan raises Melbourne’s global profile and supports long-term property values. Five major projects stand out.
The Melbourne Greenline, due in 2025, is a $224 million project that reshapes public spaces along the Yarra River. It opens a 4 km route and broadens opportunities for recreation and events.
The West Gate Tunnel Project, also due in 2025, is a major road upgrade offering drivers an alternative to the West Gate Bridge. It is designed to reduce congestion and strengthen connections between Melbourne’s west and the CBD.
The North East Link, scheduled for 2028, is the largest road project in Victoria’s history. It ties together key arterial roads across the city’s north and east, cuts travel times, and supports urban growth in that part of the region.
The Queen Victoria Market Renewal, set for 2029, is a $268 million revitalization of the city’s iconic market. It introduces new public spaces, restaurants, and activities meant to attract residents and visitors alike.
The Suburban Rail Loop, expected in 2035, is a rail project linking key suburbs. It shortens commutes and boosts housing demand near transport hubs such as Clayton and Sunshine.
For investors pursuing commercial real estate loans or residential mortgages, properties near these transit corridors consistently outperform broader market averages.
Affordability is another point in the apartment market’s favor. Apartments cost far less than detached houses, which is one of the advantages of buying an apartment instead of land. In 2024, the median price of a CBD apartment sat 56% below that of a detached house, putting ownership within reach of more buyers.
The rental market tells a similar story. The median weekly rent in the CBD rose to $750 in November 2024, up from $690 in 2023, a 9% increase year on year. Vacancies stayed tight, averaging 2.4% across 2024. Newly built CBD apartments delivered strong gross rental yields of 4.8%. Comprehensive landlord insurance and thorough property management reviews help shield those yields from operational swings.
The wider economy backs all of this. As of late 2024, unemployment stood at 4.0%, well below the 10-year average of 5.3%, a sign of a resilient national economy. Consumer confidence has recovered too. The ANZ-Roy Morgan Index climbed 12 points year on year to 86.4 in December 2024. Inflation dropped to 2.8% in September 2024, and combined with that Improved sentiment, it has produced a favorable climate for property investment.
Borrowing costs may ease as well. Major banks, including ANZ and NAB, forecast rate cuts that should lower the cost of borrowing and stimulate activity in the property 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 for investors using home loans or investment property loans.
Taken together, rapid population growth, transformative infrastructure, and strong rental performance make the Melbourne CBD an exceptional investment opportunity, and the shortage of new developments inside the CBD grid adds to its appeal. Existing apartments are positioned for capital growth. Location remains among the most critical of the many factors in buying in Melbourne, and for investors who want to capitalize on the market’s strength, the time to act is now. The advisory team can be contacted to explore curated opportunities in Melbourne CBD apartments and to schedule a one-on-one portfolio consultation.
Three figures sum up the case: a growing population, a 60% supply gap, and a $107 billion infrastructure plan, all pointing the same way for the CBD. What remains unsettled is how long that window will stay open for investors.
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