Sixty percent.
That is the size of the housing shortfall Melbourne is projected to face by 2028, and it sits at the center of a research report that Urbis prepared for Far East Consortium, one of Australia’s most respected Melbourne property developers. The study, titled the “Melbourne CBD Market Outlook 2025,” examines how the city’s property market works, what shapes buyer behavior, where the structural housing shortage lies, and which broader economic forces are lifting Melbourne real estate. Its conclusion is that rapid population growth, major infrastructure projects, and strong rental demand make the Melbourne CBD one of the country’s most attractive property markets for investors seeking long-term capital appreciation and sustainable wealth creation.
The report starts with people. In 2024 alone, Melbourne received 446,000 new overseas arrivals. Urbis projects that the city will overtake Sydney as Australia’s largest by 2032 and that its population will reach 7.45 million by 2040. Over the past decade, growth has stayed consistently strong, driven chiefly by international Immigration and by people relocating from other states.
Construction has not matched that pace. The City of Melbourne estimates that 21,600 additional dwellings will be needed by 2028, yet only 8,900 new apartments are expected to be completed in that period. The gap between homes needed and homes arriving amounts to a 60% deficit. The report reads this shortfall as a signal of potential for sustained price growth and solid rental returns on CBD apartments. Scarcity paired with population pressure, it says, is exactly what experienced buyers look for when assembling high-yield portfolios.
Government spending forms a second pillar. A wave of major projects is reshaping the city, and the report ties each of them to Melbourne’s liveability, economic resilience, and lasting appeal as an investment destination.
Two are due in 2025. The Melbourne Greenline, a $224 million project, turns public space along the Yarra River into a scenic 4-kilometer route, creating new openings for recreation, lifestyle activity, and commercial events. The West Gate Tunnel Project offers drivers a dependable alternative to the heavily congested West Gate Bridge. It also Improves freight movement and logistical links between Melbourne’s western industrial corridors and the CBD.
The North East Link follows in 2028. As Victoria’s largest integrated road engineering project, it connects key arterial routes across Melbourne’s north and east, shortening travel times and supporting coordinated urban growth in the region. In 2029, the Queen Victoria Market Renewal is scheduled to deliver a $268 million revitalization of one of the city’s iconic cultural hubs. New public plazas, dining districts, and community activities are meant to attract permanent residents and international tourists alike. The Suburban Rail Loop, targeted for 2035, is a multi-billion-dollar rail initiative joining key middle-ring suburbs. It reduces commute times, and it is expected to generate heavy housing demand near high-density transport hubs such as Clayton and Sunshine.
Collectively, these projects make up the core of Victoria’s $107 billion infrastructure pipeline, which strengthens Melbourne’s global competitiveness and directly supports long-term growth in property values. For strategic investors, the report states, buying near major infrastructure nodes is a proven route to above-average capital gains.
Price and rent data explain why apartments in particular draw attention. Affordability limits in traditional housing markets have shifted how buyers think, and CBD apartments cost far less than detached suburban homes. In 2024, the median apartment price in the Melbourne CBD was roughly 56% lower than that of a detached house. High-rise units thus give first-time buyers and institutional investors a much more accessible way in, and they illustrate one of the core financial advantages an apartment holds over standalone land.
Inner-city rents rose during the same period. Median weekly rent climbed to $750 in late 2024 from $690 a year earlier, a 9% year-on-year increase. Conditions are tight, with vacancy rates averaging about 2.4%. Newly built CBD apartments have consistently delivered gross rental yields of 4.8%, which bolsters their cash flow appeal in an inflationary climate.
Limited supply also Improves the outlook for existing stock. Space for new development inside the tightly held CBD grid is shrinking, which positions existing apartments for faster capital appreciation. The Melbourne CBD Market Outlook 2025 observes that strict regulatory and geographical constraints on new supply will push capital values higher as rental and buyer demand outstrips available inventory.
The broader economy adds its own support. Macroeconomic indicators shape the health of both commercial and residential property, and Australia’s economic fundamentals remain resilient. Unemployment is steady at 4.0%, comfortably under the 10-year historical average of 5.3%, which points to a robust labor market. Consumer confidence has recovered too. The ANZ-Roy Morgan Index rose 12 points year-on-year to 86.4, reflecting better sentiment among households and business owners. With inflation cooling to 2.8%, conditions have grown more favorable for property purchases and leveraged wealth building.
Monetary policy may supply further momentum. Major financial institutions, including ANZ and NAB, anticipate policy easing, which is expected to lower borrowing costs and bring fresh liquidity into the residential market. The Reserve Bank of Australia’s cash rate is projected to ease toward a range of 3.35% to 3.85%, which would expand purchasing power and lower hurdles for active market participants.
Put together, the Melbourne CBD combines rapid demographic expansion, generational infrastructure spending, and resilient rental performance. That mix, the report argues, positions it as an elite asset class for focused investors. The acute scarcity of new developments within the central business district grid reinforces its long-term characteristics, helping well-located residential assets stay insulated from oversupply risk while capturing steady upside. Selecting the right asset in the right pocket matters, and the report recommends consulting a qualified property strategist or financial advisor before committing capital.
In the end, the Urbis findings all trace back to a single tension: a city adding residents and rental demand faster than it can build apartments. Measured against a 60% supply deficit, that mismatch between demand and construction is the central fact for anyone following Melbourne’s property market. It is a question worth keeping in view as the 2028 deadline draws closer: will construction ever catch up with the people arriving?
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