Ten years of guiding clients through Victoria’s property cycles have left one adviser with a firm view.
By his account, he has rarely seen better conditions for a strategic purchase than the ones now taking shape in central Melbourne.
The evidence comes from Far East Consortium, a developer widely regarded as one of Australia’s most respected in Melbourne. It commissioned Urbis to prepare the “Melbourne CBD Market Outlook 2025” report, a study meant to explain how the city’s property market functions, what drives buyers, and what the economy might deliver in 2025 and beyond. Population growth, major infrastructure projects, and strong rental demand set the central business district apart, the adviser says, and anyone buying there should understand these fundamentals first.
The report treats supply as the market’s weakest point. The City of Melbourne estimates that the city will need 21,600 additional dwellings by 2028, yet the current pipeline holds only 8,900 new apartments. That is a 60% supply deficit. Room for new construction inside the CBD grid is also shrinking. The shortfall suggests real potential for price growth and rental returns on CBD apartments, and for anyone comparing real estate investment trusts with direct purchases, this structural undersupply underpins long-term capital appreciation. Existing apartments, in turn, are likely to appreciate significantly. In the report’s words, “constraints on new supply should lead to growth in capital values as demand continues to outpace supply”.
Demand, meanwhile, is heading the opposite way. Melbourne is projected to pass Sydney as Australia’s largest city by 2032, and its population is forecast to reach 7.45 million by 2040. Immigration has fueled steady growth for a decade. In 2024 alone, 446,000 new overseas arrivals settled in the city, adding further pressure on housing.
Public spending reinforces that picture. Victoria has a $107 billion infrastructure plan, which strengthens Melbourne’s global appeal and lifts long-term property values. Five projects stand out, and they are listed here in order of completion.
The Melbourne Greenline, due in 2025, is a $224 million program that will turn public spaces along the Yarra River into a 4 km corridor offering more recreation and event opportunities. The West Gate Tunnel Project, also due in 2025, is a major road upgrade that will give drivers an alternative to the West Gate Bridge, easing congestion and Improving connectivity between Melbourne’s west and the CBD. The North East Link, scheduled for 2028, is Victoria’s largest road project. It will join key arterial roads in Melbourne’s north and east, cutting travel times and supporting urban growth across the region. The Queen Victoria Market Renewal, set for 2029, is a $268 million revitalization of the iconic market, with new public spaces, restaurants, and activities meant to draw residents and visitors. The Suburban Rail Loop, due in 2035, will link key suburbs, shorten commutes, and raise 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.
Price is one reason apartments hold up well. In 2024, the median price of a Melbourne CBD apartment sat 56% below the median for a detached house, giving buyers a more accessible way in. That lower cost is one advantage of choosing an apartment over land.
Rents follow a similar pattern. The median weekly rent in the CBD reached $750 in November 2024, up from $690 in 2023, a 9% year-on-year increase. A low vacancy rate, averaging 2.4% in 2024, helped push rents higher. Newly built CBD apartments delivered gross rental yields of 4.8%, which added to their appeal. Comprehensive landlord insurance and thorough property management reviews can protect those yields from operational swings.
The broader economy offers support as well. As of late 2024, unemployment stood at 4.0%, well below the 10-year average of 5.3%, a sign of resilience. Consumer confidence has Improved significantly, with the ANZ-Roy Morgan Index rising 12 points year-on-year to 86.4 in December 2024. Inflation has also cooled, falling to 2.8% in September 2024. Together, these trends create a favorable climate for property investment.
Borrowing costs may ease too. Major banks, including ANZ and NAB, forecast rate cuts that should lower the cost of borrowing 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%, Improving affordability for investors using home loans or investment property loans.
Taken together, these pieces give Melbourne’s CBD a rare mix of rapid population growth, transformative infrastructure, and strong rental performance. Scarce new development inside the CBD grid leaves existing apartments positioned for capital growth, and of the many factors in buying in Melbourne, location remains among 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.
A swelling population, a thin apartment pipeline, heavy public investment, and solid economic indicators all point the same way for the city’s central market. What remains unsettled is how quickly new supply can close that 60% gap, and the answer will shape how the rest of this story unfolds.
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