Melbourne’s central business district faces a stark piece of arithmetic.
The City of Melbourne estimates the city will need 21,600 additional dwellings by 2028. The current construction pipeline holds only 8,900 new apartments, which leaves a supply deficit of 60%. On top of that, the space available for fresh construction inside the CBD grid keeps shrinking.
That Imbalance sits at the center of a report titled “Melbourne CBD Market Outlook 2025,” prepared by Urbis on behalf of Far East Consortium, a developer widely regarded as one of the most respected operating in Melbourne. The study lays out how the city’s property market works, what motivates buyers, and what the economy may deliver in 2025 and the years after. An adviser who has spent ten years steering clients through Victoria’s property cycles draws on it to make his case. In his assessment, he has seldom seen conditions as favorable for a strategic purchase as the ones now forming in central Melbourne. Population growth, major infrastructure projects, and strong rental demand distinguish the CBD, he says, and anyone buying there should grasp these fundamentals first.
Supply, according to the report, is the weakest link in the market. The shortfall points to real prospects for price growth and rental returns on CBD apartments. For people weighing real estate investment trusts against direct ownership, this structural undersupply supports long-term capital appreciation. Existing apartments are therefore likely to gain considerable value. The report puts it this way: “constraints on new supply should lead to growth in capital values as demand continues to outpace supply”.
Demand is moving in the opposite direction. Projections have Melbourne overtaking Sydney as Australia’s largest city by 2032, and its population is forecast to reach 7.45 million by 2040. Immigration has powered steady growth for a decade. In 2024 alone, 446,000 new overseas arrivals settled in the city, which added more strain on housing.
Government spending strengthens the outlook. Victoria has committed to a $107 billion infrastructure plan, which raises Melbourne’s international appeal and lifts long-term property values. Five projects stand out, and they are presented here in order of completion.
The Melbourne Greenline arrives first, in 2025. This $224 million program will convert public spaces along the Yarra River into a 4 km corridor with more recreation and event opportunities. The West Gate Tunnel Project is also due in 2025. The major road upgrade gives drivers an alternative to the West Gate Bridge, which should ease congestion and Improve connectivity between Melbourne’s west and the CBD.
The North East Link follows in 2028. Victoria’s largest road project, it will tie together key arterial roads in Melbourne’s north and east, shorten travel times, and support urban growth across the region. Next comes the Queen Victoria Market Renewal, set for 2029. It is a $268 million revitalization of the iconic market, bringing new public spaces, restaurants, and activities intended to attract residents and visitors. The Suburban Rail Loop, due in 2035, will connect key suburbs, cut commute times, and boost housing demand around transport hubs such as Clayton and Sunshine. For investors seeking commercial real estate loans or residential mortgages, properties close to these transit corridors consistently beat broader market averages.
Price strengthens the case for apartments. In 2024, the median price of a Melbourne CBD apartment was 56% under the median for a detached house, which gives buyers a more accessible point of entry. That lower cost is one benefit of choosing an apartment over land.
Rental figures tell a similar story. The median weekly rent in the CBD hit $750 in November 2024, compared with $690 in 2023, a year-on-year rise of 9%. Vacancy averaged 2.4% in 2024, and that tight rate helped push rents up. Newly built CBD apartments produced gross rental yields of 4.8%, adding to their appeal. Comprehensive landlord insurance and thorough property management reviews can shield those yields from operational swings.
The wider economy lends support too. At the end of 2024, unemployment was 4.0%, well under the 10-year average of 5.3%, a sign of resilience. Consumer confidence has recovered significantly: the ANZ-Roy Morgan Index climbed 12 points year-on-year to 86.4 in December 2024. Inflation cooled as well, dropping to 2.8% in September 2024. Combined, these trends produce a favorable climate for property investment.
Borrowing may also get cheaper. Major banks, including ANZ and NAB, forecast rate cuts that should reduce borrowing costs 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.
Put together, these elements give Melbourne’s CBD a rare blend of rapid population growth, transformative infrastructure, and strong rental performance. With little new development possible inside the CBD grid, existing apartments are positioned for capital growth, and among the many considerations in buying in Melbourne, location stays one of the most critical. The original author’s advice to investors who want to capitalize on the market is to act now, contact the advisory team to explore curated opportunities in Melbourne CBD apartments, and schedule a one-on-one portfolio consultation.
The figures line up on one side of the ledger: 21,600 dwellings needed, 8,900 in the pipeline, and a city expected to reach 7.45 million residents by 2040. Whether new construction can narrow that 60% gap, and how fast, is the question that will define the central market from here.
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