Melbourne is on track to pass Sydney as Australia’s largest city by 2032, and forecasts put its population at 7.
45 million by 2040. Immigration has driven most of that expansion over the past decade, and the pace has held. In 2024 alone, 446,000 new arrivals from overseas settled in Melbourne, adding to the strain on a housing market that was already tight.
That strain is the backdrop for a report titled “Melbourne CBD Market Outlook 2025.” Far East Consortium, one of the most respected property developers operating in Melbourne, commissioned Urbis to prepare it. The company wanted a clearer view of how the city’s property market works, what motivates buyers, and where the economy is heading in 2025 and the years that follow. The report concludes that the Melbourne CBD remains among the most attractive property markets in the country. It cites three supports: a growing population, major infrastructure projects, and strong rental demand.
The central figure comes from the City of Melbourne. By 2028, the city estimates, the central business district will need 21,600 additional dwellings. The current pipeline holds only 8,900 new units. That leaves supply 60% below projected need, a gap any investor considering Melbourne apartments has reason to study closely.
One analyst, who says he has spent a decade studying property cycles, tells clients that scarce supply underlies long-term capital appreciation. In his view, when demand outruns supply by a margin this wide, urban real estate tends to command premium valuations.
Public spending is the second pillar. Several large projects are making the city more livable while raising its appeal to investors.
The Melbourne Greenline is due in 2025. It is a $224 million effort to transform public spaces along the Yarra River and will create a 4-kilometer route with more recreation and event opportunities.
The West Gate Tunnel Project is also due in 2025. This major road upgrade gives drivers an alternative to the West Gate Bridge. It is designed to ease congestion and strengthen links between Melbourne’s west and the CBD.
The North East Link is scheduled for 2028 and is the largest road project in Victoria. It will connect key arterial roads in the north and east, cutting travel times and supporting urban growth across that part of the city.
The Queen Victoria Market Renewal is slated for 2029. This $268 million revitalization of the city’s iconic market adds public spaces, restaurants, and activities for residents and visitors alike.
The Suburban Rail Loop is set for 2035. It will link key suburbs and shorten commutes, 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 factor is the product itself. Affordability is a large part of the appeal, and it 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 more buyers.
Rental figures point the same way. Median weekly rent in the CBD climbed to $750 in November 2024, up from $690 in 2023, a 9% increase year on year. The vacancy rate averaged just 2.4% during 2024, and newly built CBD apartments delivered gross rental yields of 4.8%.
Development sites inside the CBD grid, meanwhile, 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 broader economy reinforces all of this, because Australia’s economic fundamentals underpin the Melbourne market. As of late 2024, unemployment stood at 4.0%, well below the 10-year average of 5.3%. Consumer confidence has rebounded too: 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, these 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 looking to secure a Melbourne CBD apartment.
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. 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.
A shortfall of 60%, a rising population, heavy public investment, and firm rents all point the same way for Melbourne CBD apartments. Whether the distance between 21,600 needed dwellings and 8,900 planned ones narrows or widens will shape the city’s property market for years to come.
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