In 2024 alone, 446,000 new arrivals came to Melbourne from overseas, and every one of them needed somewhere to live.
That surge is one of the pillars of a report titled “Melbourne CBD Market Outlook 2025,” which argues that apartments in the heart of the city are positioned for strong price growth and solid rental returns.
Urbis prepared the report for Far East Consortium, one of Australia’s most respected developers in Melbourne. The company wanted a clearer view of how the city’s property market works, what motivates buyers, and where the economy is headed in 2025 and beyond. The report’s answer is that rapid population growth, major infrastructure under construction, and robust rental demand make Melbourne one of the most attractive property markets in the country. Any investor entering that market, it says, should understand why CBD apartments have performed so well as an asset class.
The sharpest number in the document concerns supply. The City of Melbourne says the central business district needs 21,600 additional dwellings by 2028. The apartment pipeline contains only 8,900 new units, a shortfall of 60%.
Demand behind that gap starts with people. The report projects that Melbourne will overtake Sydney as Australia’s largest city by 2032 and reach 7.45 million residents by 2040. Immigration has driven steady growth for a decade. A property analyst with ten years of experience studying market cycles calls scarce supply the ultimate foundation of long-term capital appreciation. When demand outstrips supply by a margin this wide, the analyst says, city real estate tends to command premium valuations.
Government spending is the next driver. Victoria has committed to a $107 billion infrastructure plan, and its projects lift both Melbourne’s livability and its appeal to investors. The same analyst says that, in their experience, property values climb faster in corridors directly touched by public capital spending. Five projects stand out, and they arrive in sequence.
Two are due in 2025. The Melbourne Greenline is a $224 million effort to transform public space along the Yarra River. It creates a 4-kilometer route, with Improved recreation and new opportunities for events. The West Gate Tunnel Project, a major road upgrade, offers drivers an alternative to the West Gate Bridge. It is meant to ease congestion and strengthen links between Melbourne’s west and the CBD.
The North East Link follows in 2028. It is the largest road project in Victoria’s history, and it will join key arterial roads in the city’s north and east, shorten travel times, and support urban growth across the region.
In 2029, the Queen Victoria Market Renewal is set to deliver a $268 million revitalization of one of Melbourne’s best-known landmarks. New public spaces, restaurants, and activities are intended to draw residents and visitors alike.
Furthest out is the Suburban Rail Loop, planned for 2035. It will connect key suburbs and cut commute times, and it is also expected to lift housing demand near transport hubs such as Clayton and Sunshine.
Cost is another piece of the argument. Buying an apartment instead of land carries a price advantage, because CBD apartments sell for far less than detached houses. In 2024, the median apartment price in the Melbourne CBD sat 56% below the median for a detached house, which put apartments within reach of many more buyers.
The rental figures point the same way. The median weekly rent in the CBD reached $750 in November 2024, up from $690 in 2023, a year-on-year increase of 9%. Vacancy remained low, averaging 2.4% through 2024. Newly built CBD apartments delivered gross rental yields of 4.8%, which strengthens their appeal for investors.
Building more, however, runs into a physical limit. Space for new development inside the CBD grid is getting harder to find, so existing apartments are likely to see significant capital appreciation. The report states that “constraints on new supply should lead to growth in capital values as demand continues to outpace supply”.
The national economy offers further support. Australia’s fundamentals are strong, with unemployment at 4.0% in late 2024, well below the 10-year average of 5.3%. Consumer confidence has recovered too: the ANZ-Roy Morgan Index rose 12 points over the year to 86.4 in December 2024. Inflation cooled to 2.8% in September 2024. Taken as a group, those readings set up a favorable climate for property investment.
Borrowing costs may also tilt toward buyers. Major banks, including ANZ and NAB, forecast rate cuts that should lower loan costs and stimulate more 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%, a move that would Improve affordability for investors weighing Melbourne CBD apartments.
Pulling the findings together, the report describes a market where fast population growth, large public works, and strong rental performance converge. Limited room for new construction inside the CBD grid keeps existing apartments positioned for capital growth. Location, the report suggests, remains one of the most critical factors for any buyer in Melbourne.
The report’s case rests on forces moving in the same direction: a growing population, heavy public investment, and firm rents, all pressing against a CBD with little space left to build. The size of the distance between what the city needs and what is actually coming is what gives the findings their weight.
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