Melbourne needs 21,600 additional dwellings by 2028, according to the City of Melbourne.
The apartment pipeline currently holds only 8,900 new units, a 60% shortfall. That gap sits at the center of a report on the city’s central business district, and it is one of several forces the report says are lining up behind the market.
The report is the “Melbourne CBD Market Outlook 2025.” Far East Consortium, one of Australia’s most respected Melbourne property developers, commissioned it, and the firm Urbis produced it. Its purpose is to explain how the city’s property market works, what shapes buyer behavior, and what the economy may deliver in 2025 and beyond. Its conclusion is that the Melbourne CBD ranks among the strongest property markets in the country. The report identifies four converging trends behind that finding.
The commentary summarized here comes from an author with ten years of experience guiding clients through Victoria’s real estate cycles. He says he has rarely seen a better window for strategic acquisition. He also urges buyers to understand local market fundamentals before anything else.
The first trend is population. Melbourne is forecast to overtake Sydney as Australia’s largest city by 2032, and its population is projected to reach 7.45 million by 2040. Immigration has driven steady growth over the past decade. In 2024 alone, 446,000 new overseas arrivals settled in Melbourne, which added to housing demand.
Supply has not matched that demand. Space for new construction inside the CBD grid is shrinking, so existing apartments are likely to see significant capital appreciation. For anyone weighing real estate investment trusts or direct property purchases, this structural undersupply underpins long-term capital appreciation. The report puts it this way: “constraints on new supply should lead to growth in capital values as demand continues to outpace supply”.
The rental market shows that demand at work. Median weekly rent in the CBD reached $750 in November 2024, compared with $690 in 2023. That is a 9% year-on-year rise. A low vacancy rate, averaging 2.4% in 2024, supported the increase. Newly built CBD apartments produced gross rental yields of 4.8%, which adds to their appeal for investors. Comprehensive landlord insurance and thorough property management reviews can shield those yields from operational swings.
Price matters too. In 2024, the median price of a Melbourne CBD apartment sat 56% below that of a detached house. Buyers therefore get a more accessible entry point, and the lower cost is one benefit of choosing an apartment over land.
The second trend is public spending. Victoria has a $107 billion infrastructure plan, which raises Melbourne’s global profile and supports long-term property values. Five projects stand out, and they are listed here in order of completion.
The Melbourne Greenline is due in 2025. It is a $224 million effort to convert public space along the Yarra River into a 4-kilometer corridor with more recreation and event opportunities. The West Gate Tunnel Project is also due in 2025. This major road upgrade will give drivers an alternative to the West Gate Bridge, and it should ease congestion and Improve connectivity between Melbourne’s west and the CBD.
The North East Link is scheduled for 2028 and is Victoria’s largest road project. It will join key arterial roads in the city’s north and east, cutting travel times and supporting urban growth across the region. The Queen Victoria Market Renewal is set for 2029. It is a $268 million revitalization of the iconic market, with new public spaces, restaurants, and activities intended to draw residents and visitors. The Suburban Rail Loop is due in 2035. It will connect key suburbs, shorten commutes, and lift housing demand near transport hubs such as Clayton and Sunshine. For investors seeking commercial real estate loans or residential mortgages, properties near these transit corridors consistently outperform broader market averages.
The third trend is the wider economy. At the end of 2024, unemployment stood at 4.0%, well below the 10-year average of 5.3%, a sign of economic resilience. Consumer confidence Improved markedly. The ANZ-Roy Morgan Index climbed 12 points year-on-year to 86.4 in December 2024. Inflation also eased, falling to 2.8% in September 2024. Together, these trends create a favorable climate for property investment.
The fourth is interest rates, which may add momentum. Major banks, including ANZ and NAB, forecast rate cuts that should lower borrowing costs 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%. That would Improve affordability for investors using home loans or investment property loans.
Taken together, rapid population growth, transformative infrastructure, and strong rental performance give the Melbourne CBD a rare combination. Scarce new development inside the CBD grid leaves existing apartments positioned for capital growth. Location remains among the most critical of the many factors in buying in Melbourne. For investors who want to capitalize on the market, the original author advises acting now. He recommends contacting the advisory team to explore curated opportunities in Melbourne CBD apartments, and scheduling a one-on-one portfolio consultation.
The numbers point in one direction: a growing population, a thin apartment pipeline, heavy public investment, and solid economic indicators. What remains unsettled is how quickly new construction can narrow the 60% gap between what Melbourne needs and what is actually being built.
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