A 60% shortfall sits at the center of Melbourne’s central business district property story.
According to the City of Melbourne, the city will need 21,600 additional dwellings by 2028, yet the current apartment pipeline holds only 8,900 new units. That gap is the first of four converging trends identified in a report commissioned by Far East Consortium, one of Australia’s most respected Melbourne property developers.
Far East Consortium engaged Urbis to produce the “Melbourne CBD Market Outlook 2025.” The report was designed to explain how the city’s property market works, what shapes buyer behavior, and what the economy may deliver in 2025 and beyond. Its verdict is that the CBD counts among the strongest property markets in the country.
The author of the original piece has spent ten years guiding clients through Victoria’s real estate cycles. He says he has rarely seen a better window for strategic acquisition, and he urges buyers to grasp local market fundamentals first.
The supply shortfall is the foundation of the argument. For anyone weighing real estate investment trusts or direct property purchases, this structural undersupply underpins long-term capital appreciation. Room for new construction inside the CBD grid is shrinking, too, so existing apartments are likely to see significant capital appreciation. The report states, “constraints on new supply should lead to growth in capital values as demand continues to outpace supply”.
Demand is climbing alongside it. Forecasts show Melbourne overtaking Sydney as Australia’s largest city by 2032, with a population of 7.45 million by 2040. Immigration has driven steady growth over the past decade, and in 2024 alone, 446,000 new overseas arrivals settled in Melbourne, adding to housing demand.
Rental data shows that demand at work. Median weekly rent in the CBD reached $750 in November 2024, compared with $690 in 2023, a 9% year-on-year rise. A low vacancy rate, averaging 2.4% in 2024, supported that 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 protect those yields from operational swings.
Price matters as well. The median price of a Melbourne CBD apartment in 2024 sat 56% below that of a detached house. That gives buyers a more accessible entry point, and the lower cost is one benefit of choosing an apartment over land.
The second pillar 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 presented here in order of completion.
The Melbourne Greenline, due in 2025, is a $224 million effort to convert public space along the Yarra River into a 4-kilometer corridor with more recreation and event opportunities. Also due in 2025, the West Gate Tunnel Project is a major road upgrade that will offer drivers an alternative to the West Gate Bridge. It should ease congestion and Improve 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 the city’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, bringing new public spaces, restaurants, and activities intended to draw residents and visitors. The Suburban Rail Loop, due in 2035, 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 broader economy lends support. 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, with the ANZ-Roy Morgan Index rising 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.
Interest rates may add further 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 drop to between 3.35% and 3.85%, Improving 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. The scarcity of 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, contacting the advisory team to explore curated opportunities in Melbourne CBD apartments, and scheduling a one-on-one portfolio consultation.
The case rests on four points that line up: a growing population, a thin apartment pipeline, heavy public investment, and solid economic indicators. What remains open is how quickly new supply can close a 60% gap.
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