The City of Melbourne estimates that the city will need 21,600 additional dwellings by 2028.
The residential apartment pipeline is on track to deliver only 8,900. That leaves a supply shortfall of 60 percent, and the gap is one of the central findings in a new study of the Melbourne central business district’s property market.
Far East Consortium, one of the better-known property developers in Melbourne, commissioned the research firm Urbis to write the “Melbourne CBD Market Outlook 2025.” The report examines how the city’s property market is shifting, which factors shape purchasing behavior, and what the wider economic picture looks like for 2025 and the years after. The overall assessment is that the inner-city core of Victoria’s capital has shown notable resilience through market cycles. A growing population, large infrastructure projects, and heavy rental demand all support that view, and together they make the area attractive to investors who are building wealth over the long term.
Population is the first pillar. According to the Melbourne CBD Market Outlook 2025, Melbourne is on course to overtake Sydney as Australia’s largest city by 2032. Projections put its population at 7.45 million by 2040. Over the past decade, growth has been driven largely by international Immigration. In 2024 alone, 446,000 new overseas arrivals came to Melbourne, a steady stream of people who need housing and who add directly to demand for Melbourne CBD real estate. Set against the supply figures above, the mismatch is stark, and it is the reason the report sees strong potential for accelerated capital growth and solid rental returns in Melbourne apartments.
Infrastructure is the second pillar. A series of major projects is changing how the city connects and, according to the report, pushing property values higher along key corridors. These projects are also expected to Improve Melbourne’s livability and its long-term appeal as a high-yield investment destination.
The Melbourne Greenline, due in 2025, is a $224 million initiative that will turn public space along the Yarra River into a linear park 4 kilometers long. It is designed to create new recreational and commercial opportunities. The West Gate Tunnel Project, also due in 2025, is a critical road upgrade. It gives drivers a vital alternative to the West Gate Bridge, eases congestion, and streamlines freight and passenger traffic between Melbourne’s western precincts and the CBD.
The Queen Victoria Market Renewal, scheduled for 2029, is a $268 million revitalization of the city’s historic marketplace. It will add new public plazas, dining districts, and community hubs meant to draw residents and tourists alike. The North East Link, due in 2028, is the largest road project in Victoria’s history. It will connect major arterial routes in Melbourne’s north and east, shorten travel times, and support decentralized urban growth.
The Suburban Rail Loop, slated for 2035, is a multi-billion-dollar transit project linking middle-ring suburbs. It is expected to cut commute times and lift housing demand near strategic transport hubs such as Clayton and Sunshine. All of these projects belong to Victoria’s $107 billion infrastructure pipeline, which the report credits with strengthening Melbourne’s global competitiveness and supporting property value growth for Melbourne CBD apartments.
Affordability and rental performance form the third pillar. The report describes affordability as a primary catalyst for inner-city housing demand. In 2024, the median price of an apartment in the Melbourne CBD was roughly 56 percent lower than that of a detached suburban house. That makes high-density property an accessible entry point for experienced buyers and first-time investors alike.
Rental demand in the CBD core has also reached unprecedented levels. The median weekly rent rose to $750 in late 2024, up from $690 a year earlier, a 9 percent increase year on year. The vacancy rate, which averages just 2.4 percent, remains persistently tight and underpins that momentum. Newly built CBD apartments have consistently delivered strong gross rental yields, averaging 4.8 percent, which the report says reinforces their defensive qualities within a portfolio exposed to inflation.
Land supply is a further consideration. Prime parcels inside the CBD grid are becoming scarcer, which positions existing stock for significant capital appreciation. The Melbourne CBD Market Outlook 2025 notes that strict limits on new supply will naturally push capital values higher as competition among buyers intensifies.
The broader economy provides what the report calls a stable macroeconomic floor. Australia’s national unemployment rate sits near a healthy 4.0 percent, comfortably below its 10-year historical average of 5.3 percent. Consumer sentiment has rebounded visibly as well. The ANZ-Roy Morgan Index rose 12 points year on year to 86.4, helped by inflation cooling to 2.8 percent.
Major financial institutions also expect the Reserve Bank of Australia to cut interest rates, easing the cash rate toward a range of 3.35 percent to 3.85 percent. Borrowing costs are therefore set to moderate. According to the report, this easing cycle will unlock pent-up buyer demand and accelerate market activity across Victoria.
Taken together, rapid demographic expansion, heavy infrastructure spending, and exceptional rental performance give the Melbourne CBD what the report describes as an elite investment proposition. Because future high-density development in the central grid is fundamentally scarce, the report concludes that well-located residential assets are uniquely positioned to outperform over the long term. It adds that choosing the right asset class and location is paramount, and it advises buyers to consult a qualified property strategist or financial advisor before exploring Melbourne CBD investment opportunities.
In short, a 60 percent apartment shortfall, a population heading toward 7.45 million, and a $107 billion infrastructure pipeline all point the same direction in the report’s analysis: demand for central Melbourne housing is growing faster than the city can build it.
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