Melbourne has a housing shortage, and the numbers behind it are stark.
The City of Melbourne estimates the region will need an additional 21,600 dwellings by 2028. The current apartment pipeline, however, contains only 8,900 new apartments. That leaves a supply deficit of 60%, and this gap sits at the heart of the argument that apartments in the Melbourne central business district, or CBD, offer a strong investment opportunity in 2025 and beyond.
The argument draws on a research report. Far East Consortium, one of Australia’s most respected Melbourne property developers, commissioned Urbis to produce the Melbourne CBD Market Outlook 2025. The company wanted a deeper understanding of how the city’s property market operates, what influences purchasing behavior, and what the economic outlook looks like for 2025 and the years that follow. The material describes Melbourne CBD as one of Australia’s most attractive property markets, supported by a growing population, transformative infrastructure projects, and strong rental demand. It adds that navigating this market requires a clear grasp of what makes CBD apartments such a resilient asset class.
Start with the people. According to the report, Melbourne is set to overtake Sydney as Australia’s largest city by 2032, and its population is projected to reach 7.45 million by 2040. The city has posted strong population growth throughout the past decade, driven by Immigration. In 2024 alone, Melbourne received 446,000 new overseas arrivals, which added to the ongoing demand for housing. Set against the shortfall of 8,900 apartments versus the 21,600 dwellings needed, this mismatch points to significant potential for price growth and rental returns for CBD apartments.
The author of the material, who has spent a decade analyzing property cycles, says clients often hear the same advice: scarcity of supply is the ultimate foundation of long-term capital appreciation. When demand outstrips supply by such a wide margin, the author says, urban real estate naturally commands premium valuations.
Price is another factor. Compared with detached housing, CBD apartments are more affordable, which the material cites as one of the advantages of buying an apartment over land. In 2024, the median price of a CBD apartment was 56% lower than that of a detached house, making apartments a more accessible choice for buyers.
Rental figures tell a similar story. Median weekly rents in the CBD climbed to $750 in November 2024, up from $690 in 2023, a year-on-year increase of 9%. Vacancy remained low, averaging 2.4% across 2024. Newly built CBD apartments achieved gross rental yields of 4.8%, which the material says reinforces their appeal to investors.
New supply is also running out of room. Opportunities for fresh developments within the CBD grid are becoming increasingly scarce, so existing CBD apartments are likely to see significant capital appreciation. The Melbourne CBD Market Outlook 2025 report notes that “constraints on new supply should lead to growth in capital values as demand continues to outpace supply”.
Public investment adds another layer. Major infrastructure projects strengthen Melbourne’s livability and its appeal as an investment destination. Five are highlighted. The Melbourne Greenline, due in 2025, is a $224 million project that will transform public spaces along the Yarra River, creating a 4 kilometer journey with enhanced 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 connect 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 Melbourne’s iconic market, adding new public spaces, restaurants, and activities to attract residents and visitors. The Suburban Rail Loop, planned for 2035, is a rail project connecting key suburbs. It is meant to reduce commute times and boost housing demand near transport hubs such as Clayton and Sunshine.
All of these projects belong to Victoria’s $107 billion infrastructure plan, which enhances Melbourne’s global appeal and drives long-term growth in property values. The author adds that, in their experience, property values consistently appreciate faster within corridors directly affected by government capital expenditure.
The broader economy provides the final piece of the picture. Australia’s strong economic fundamentals underpin Melbourne’s property market. As of late 2024, the unemployment rate stood at 4.0%, well below the 10-year average of 5.3%, a sign of a resilient economy. Consumer confidence has Improved significantly as well. The ANZ-Roy Morgan Index rose by 12 points year-on-year to reach 86.4 in December 2024. That positive sentiment, combined with inflation falling to 2.8% in September 2024, has created a favorable environment for property investment.
Interest rates may help too. Major banks, including ANZ and NAB, forecast rate cuts that are expected to reduce borrowing costs and stimulate greater activity in the property market. By December 2025, the Reserve Bank of Australia’s cash rate is anticipated to fall to between 3.35% and 3.85%, which would further Improve affordability for investors looking to secure Melbourne CBD apartments.
Taken together, the material argues, rapid population growth, transformative infrastructure, and strong rental performance give Melbourne CBD an exceptional combination. The scarcity of new developments within the CBD grid only adds to the appeal, since existing apartments are positioned for capital growth. Buyers in Melbourne have many factors to weigh, and the right location is among the most critical. For investors hoping to capitalize on the market’s robust dynamics, the material says the time to act is now. It invites readers to take the next step in their wealth-creation journey by exploring a curated portfolio of premium Melbourne CBD apartments and scheduling a private consultation with a senior advisory team to secure a position in this thriving market.
In short, a 60% supply gap, a population on track to reach 7.45 million, rising rents, and a $107 billion infrastructure plan all point in one direction in the material’s view. What remains to be seen is how quickly the city’s apartment supply can respond to demand of this scale.
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