Melbourne is on course to pass Sydney by 2032 and become the largest city in Australia.
That projection comes from the Melbourne CBD Market Outlook 2025, which also forecasts a population of 7.45 million by 2040. Overseas migration has fueled much of the growth over the last ten years. In 2024 alone, 446,000 people came from abroad, and each new household adds to the pressure on housing in the Melbourne CBD.
The report has a clear sponsor. Far East Consortium, one of the most respected Melbourne property developers in Australia, commissioned the research firm Urbis to produce it. The study looks at how the city’s property market is shifting, which factors drive purchasing behavior, and what the wider economy holds for 2025 and the years beyond. One observer, who has followed Australian property for more than a decade and seen several cycles rise and fall, singles out the inner-city core of Victoria’s capital for its steady resilience. Population growth, large infrastructure projects, and strong rental demand combine to give long-term investors a solid base for building wealth.
Against that demand, the supply picture is thin. The City of Melbourne estimates the city will need 21,600 more dwellings by 2028, yet the apartment pipeline is expected to produce just 8,900 new units. That leaves a supply deficit of 60% in the inner-city apartment market. With demand running well ahead of construction, the potential exists for faster capital growth and strong rental returns on apartments.
Land constraints deepen the squeeze. Prime sites inside the central grid are growing scarcer, which puts existing stock in a position for significant capital appreciation. According to the Melbourne CBD Market Outlook 2025, tight limits on new supply should lift capital values as buyers compete harder for what is available. Since high-density development inside the central grid will be rare in the future, well-located residential assets are uniquely placed to outperform over the long term.
Prices and rents explain why apartments attract so much attention. In 2024, the median apartment price in the Melbourne CBD sat about 56% below the median for a detached house in the suburbs. That difference makes high-density property an accessible entry point, whether the buyer is experienced or investing for the first time. Rental demand in the CBD core has reached record levels. Median weekly rent rose to $750 in late 2024 from $690 a year earlier, an increase of 9%. Vacancy stays persistently tight, averaging only 2.4%. Newly built CBD apartments have consistently produced average gross rental yields of 4.8%, which strengthens their defensive qualities in a portfolio exposed to inflation.
Major infrastructure is transforming the city at the same moment, and it adds to Melbourne’s long-term pull as a high-yield investment destination. These capital-intensive projects are reshaping urban connectivity and lifting property values along key corridors.
Two projects are scheduled for 2025. The Melbourne Greenline is a $224 million initiative that will convert public space along the Yarra River into a 4 km linear park, opening new recreational and commercial opportunities. The West Gate Tunnel Project is a critical road upgrade that gives drivers a vital alternative to the West Gate Bridge. It is designed to ease congestion and smooth freight and passenger movement between Melbourne’s western precincts and the CBD.
The North East Link follows in 2028 as the largest road project in Victoria. It will join major arterial routes across Melbourne’s north and east, cutting travel times and supporting decentralized urban growth. In 2029, the Queen Victoria Market Renewal is due. This $268 million revitalization of Melbourne’s historic marketplace will bring new public plazas, dining districts, and community hubs meant to draw residents and tourists alike. Further out, in 2035, comes the Suburban Rail Loop, a multi-billion-dollar transit project that will link the middle-ring suburbs. It is expected to shorten commutes and boost housing demand near strategic transport hubs such as Clayton and Sunshine.
Together, these projects make up the backbone of Victoria’s $107 billion infrastructure pipeline. They steadily raise Melbourne’s global competitiveness and underpin property value growth for apartments in the Melbourne CBD.
The national economy provides a stable macroeconomic floor beneath all of this. Australia’s unemployment rate is around 4.0%, comfortably under its 10-year historical average of 5.3%. Consumer sentiment has recovered noticeably too. The ANZ-Roy Morgan Index rose 12 points year on year to 86.4, helped by inflation cooling to 2.8%.
Interest rates could add momentum. Major financial institutions expect the Reserve Bank of Australia to cut rates, with the cash rate projected to ease toward a range of 3.35% to 3.85%. Borrowing costs are therefore set to moderate. This easing cycle will release pent-up buyer demand and speed up market activity across Victoria.
Buying property calls for strategic insight, and choosing the right asset class and location matters most. For anyone who wants to benefit from Melbourne’s economic momentum and secure their financial future, the next step is to speak with a qualified property strategist or financial advisor and look into premier Melbourne CBD investment opportunities.
Population growth, heavy infrastructure spending, and strong rental performance all converge in the Melbourne CBD, and together they form an elite investment proposition. Yet one figure frames the rest of the report: a 60% apartment shortfall, with 21,600 dwellings needed by 2028 against 8,900 in the pipeline. Whether construction can ever close that distance is the open question hanging over the market.
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