Melbourne took in 446,000 new overseas arrivals in 2024 alone, and a new report argues that the city’s central business district has not built nearly enough homes to hold them.
The study, titled “Melbourne CBD Market Outlook 2025,” was prepared by Urbis for Far East Consortium, one of Australia’s most respected Melbourne property developers. It examines how the city’s property market operates, what drives buyer behavior, and where the economy is heading in 2025 and beyond. Its verdict is that the CBD remains among the most attractive property markets in the country, supported by population growth, major infrastructure projects, and strong demand from renters.
Start with the people. Immigration has fueled steady growth in Melbourne for a decade. The city is on track to pass Sydney as Australia’s largest by 2032, and projections put its population at 7.45 million by 2040. Each new wave of arrivals adds more pressure on the housing stock.
Supply is where the report finds the sharpest Imbalance. The City of Melbourne estimates that the CBD will need 21,600 additional dwellings by 2028, yet only 8,900 new apartments are in the pipeline. The shortfall comes to about 60%, which the report reads as room for both price growth and rental returns. Whether an investor is considering real estate investment trusts or buying property directly, this structural undersupply underpins long-term capital appreciation, according to the document. Sites available for new development inside the CBD grid are also running short, so existing apartments are likely to post significant capital gains. In the report’s words, “constraints on new supply should lead to growth in capital values as demand continues to outpace supply.”
Price adds a further advantage. Apartments cost far less than detached houses, and that gap is one benefit of buying an apartment rather than land. In 2024, the median price of a CBD apartment sat 56% below that of a detached house, which brought ownership within reach of more buyers.
The rental figures point the same way. Median weekly rent in the CBD reached $750 in November 2024, up from $690 in 2023, a 9% increase year on year. Vacancies stayed tight, averaging 2.4% across 2024, and newly built CBD apartments delivered strong gross rental yields of 4.8%. The report adds that comprehensive landlord insurance and thorough property management reviews help shield those yields from operational swings.
The national economy supplies more support. As of late 2024, unemployment stood at 4.0%, well below the 10-year average of 5.3%, a sign of a resilient economy. Consumer confidence has recovered, with the ANZ-Roy Morgan Index climbing 12 points year on year to 86.4 in December 2024. Inflation fell to 2.8% in September 2024. Together with better sentiment, that has created 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 price of credit and stimulate 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.
Government spending backs up the outlook. Victoria’s $107 billion infrastructure plan raises Melbourne’s global profile and supports long-term property values. Five projects stand out.
Due in 2025, the Melbourne Greenline is a $224 million effort to reshape public spaces along the Yarra River. It creates a 4 km route with more recreation and event opportunities. 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 is meant to ease congestion and tighten links 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 across the city’s north and east, shortens travel times, and supports urban growth in that region. In 2029, the Queen Victoria Market Renewal will deliver a $268 million revitalization of the city’s iconic market, adding public spaces, restaurants, and activities for residents and visitors. The Suburban Rail Loop, expected in 2035, will link key suburbs, shorten commutes, and lift housing demand around transport hubs such as Clayton and Sunshine. For investors weighing commercial real estate loans or residential mortgages, properties near these transit corridors consistently outperform broader market averages.
Pulling the threads together, the report describes Melbourne CBD as an exceptional investment opportunity, resting on rapid population growth, transformative infrastructure, and strong rental performance. The scarcity of new developments inside the CBD grid adds to that appeal, and existing apartments are positioned for capital growth. Location remains one of the most critical of the many factors in buying in Melbourne. For investors who want to capitalize on the market’s strength, the report’s message is that 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.
In the end, the numbers all lean in one direction: a growing population, a 60% supply gap, and a $107 billion infrastructure plan. What remains unsettled is how long that window will stay open for investors.
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