Start with the arithmetic.
By 2028, the City of Melbourne estimates, the central business district will need 21,600 additional dwellings. The pipeline currently holds only 8,900 new units. That leaves the supply 60% short of what the city expects to need, a number any investor sizing up Melbourne apartments has reason to study.
The figure comes from a report titled “Melbourne CBD Market Outlook 2025.” Far East Consortium, one of Australia’s most respected Melbourne property developers, hired Urbis to produce it. The company wanted a clearer view of how the city’s property market operates, what drives buyer behavior, and where the economy is heading in 2025 and beyond. The report’s central finding is that Melbourne CBD remains one of the country’s most attractive property markets, supported by a growing population, major infrastructure projects, and strong rental demand. Seeing why apartments have held up so well as an asset class is the key to reading that market.
Population growth is the first driver. Melbourne is projected to pass Sydney as Australia’s largest city by 2032, and forecasts put its population at 7.45 million by 2040. Immigration has powered most of the growth of the past decade. In 2024 alone, 446,000 new overseas arrivals landed in Melbourne, which added to the strain on housing.
One analyst, who says he has spent a decade studying property cycles, tells clients that scarce supply underlies long-term capital appreciation. When demand outstrips supply by this wide a margin, he says, urban real estate tends to command premium valuations.
Public investment is the second pillar, and several large projects are strengthening both the city’s livability and its draw for investors. The Melbourne Greenline, due in 2025, is a $224 million effort to transform public spaces along the Yarra River. It will create a 4-kilometer route with more recreation and event opportunities. The West Gate Tunnel Project, also due in 2025, is a major road upgrade that gives drivers an alternative to the West Gate Bridge. It is designed to ease congestion and Improve links between Melbourne’s west and the CBD. The North East Link, scheduled for 2028, is the largest road project in Victoria. It will connect key arterial roads in the north and east, cutting travel times and supporting urban growth across that part of the city. The Queen Victoria Market Renewal, slated for 2029, is a $268 million revitalization of the city’s iconic market, adding public spaces, restaurants, and activities for residents and visitors alike. The Suburban Rail Loop, set for 2035, will link key suburbs and shorten commutes. It is expected to lift housing demand around transport hubs such as Clayton and Sunshine.
All of these projects fall under Victoria’s $107 billion infrastructure plan, which raises Melbourne’s global profile and drives long-term growth in property values. The same analyst says that in his experience, values climb faster in corridors directly touched by government capital spending.
The third factor is the apartments themselves. Affordability is a large part of their appeal, and it is one advantage apartments hold over land. In 2024, the median price of a Melbourne CBD apartment was 56% below that of a detached house, which put apartments within reach of more buyers.
Rents point the same direction. Median weekly rent in the CBD rose to $750 in November 2024, up from $690 in 2023, a 9% increase year on year. The vacancy rate averaged just 2.4% during 2024, and newly built CBD apartments delivered gross rental yields of 4.8%.
Meanwhile, new development sites inside the CBD grid are growing harder to find, so existing apartments are likely to see significant capital appreciation. The “Melbourne CBD Market Outlook 2025” report states that “constraints on new supply should lead to growth in capital values as demand continues to outpace supply”.
The wider economy backs all of this up. Australia’s economic fundamentals underpin the Melbourne market. As of late 2024, unemployment stood at 4.0%, well below the 10-year average of 5.3%. Consumer confidence has recovered too: the ANZ-Roy Morgan Index gained 12 points year on year to reach 86.4 in December 2024. Inflation fell to 2.8% in September 2024. Together, these trends have created a favorable climate for property investment.
Interest rates could add further support. Major banks, including ANZ and NAB, forecast rate cuts that should reduce borrowing costs and stimulate activity in the property market. The Reserve Bank of Australia’s cash rate is expected to fall to between 3.35% and 3.85% by December 2025, which would Improve affordability for investors looking to secure a Melbourne CBD apartment.
Location matters as much as any of these numbers. Buyers in Melbourne face many variables, and choosing the right location is among the most critical. Rapid population growth, transformative infrastructure, and strong rental performance combine to make the CBD an exceptional investment opportunity, and the scarcity of new development inside the grid only strengthens the case for existing apartments.
Taken together, a 60% supply shortfall, a rising population, heavy public investment, and firm rents all point the same way for Melbourne CBD apartments. Whether that gap narrows or widens will shape the city’s property market for years to come.
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