Between 2024 and 2040, one number frames the story of Melbourne’s property market: 60%.
That is the size of the apartment shortfall the City of Melbourne expects by 2028. It estimates the city needs 21,600 additional dwellings by then, yet only 8,900 new apartments are projected to be finished. The finding comes from the “Melbourne CBD Market Outlook 2025,” a report prepared by Urbis for Far East Consortium, one of Australia’s most respected Melbourne property developers. The developer commissioned the study to examine how the city’s property market works, including what shapes buyer behavior, where the structural housing shortage sits, and which wider economic forces are lifting Melbourne real estate.
The report’s conclusion is direct. Fast population growth, major infrastructure projects, and strong rental demand make Melbourne CBD one of the country’s most attractive property markets for investors seeking long-term capital appreciation and sustainable wealth creation. According to the report, the distance between homes needed and homes coming signals potential for sustained price growth and solid rental returns on CBD apartments. Scarcity combined with population pressure is exactly what experienced buyers seek when assembling high-yield portfolios.
The pressure itself comes from people. Urbis projects that Melbourne will pass Sydney to become Australia’s largest city by 2032, and that its population will reach 7.45 million by 2040. Growth has run consistently strong for a decade, fueled mainly by international Immigration and by residents moving from other states. In 2024 alone, 446,000 new overseas arrivals settled in Melbourne.
Construction on the infrastructure side is changing the city as that demand builds. The report ties these projects to Melbourne’s liveability, economic resilience, and long-term appeal as an investment destination. Two are due in 2025. The Melbourne Greenline, a $224 million project, turns public spaces along the Yarra River into a scenic 4 km route, creating new openings for recreation, lifestyle, and commercial events. The West Gate Tunnel Project offers drivers a dependable alternative to the heavily congested West Gate Bridge, and it Improves freight movement and logistical links between Melbourne’s western industrial corridors and the CBD.
The schedule then reaches 2028, when the North East Link is due. It is Victoria’s largest integrated road engineering project, connecting key arterial routes across Melbourne’s north and east, cutting travel times, and supporting coordinated urban growth across the region. In 2029, the Queen Victoria Market Renewal is set to deliver a $268 million revitalization of one of the city’s iconic cultural hubs. New public plazas, dining districts, and community activities are designed to draw permanent residents and international tourists alike.
The longest-range project is the Suburban Rail Loop, targeted for 2035. This multi-billion-dollar rail initiative connects key middle-ring suburbs and shortens commutes. It is also expected to generate heavy housing demand near high-density transport hubs such as Clayton and Sunshine. Together, these projects anchor Victoria’s $107 billion infrastructure pipeline, which lifts Melbourne’s global competitiveness and directly supports long-term property value growth. For strategic investors, the report says, buying near major infrastructure nodes is a proven route to above-average capital gains.
Price is the reason 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 Melbourne CBD sat roughly 56% below that of a detached house. High-rise units therefore give first-time buyers and institutional investors a much more accessible way in, and they show one of the core financial advantages of an apartment over standalone land.
Rents follow a similar pattern. Inner-city rents rose over the same period, and the median weekly rent reached $750 in late 2024, compared with $690 a year earlier. That works out to a 9% year-on-year increase. Vacancy rates average about 2.4%, which signals tight conditions. Newly built CBD apartments have reliably produced gross rental yields of 4.8%, a figure that supports their cash flow appeal in an inflationary climate.
Constrained supply strengthens the picture for existing apartments too. Chances for new development inside the tightly held CBD grid are becoming rarer, which positions existing apartments for faster capital appreciation. The report notes that strict regulatory and geographical limits on new supply will push capital values higher, since rental and buyer demand is outrunning available inventory.
The broader economy supplies another cushion. Macroeconomic indicators shape the health of both commercial and residential property, and Australia’s fundamentals remain resilient. Unemployment holds 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 as well. The ANZ-Roy Morgan Index rose 12 points year-on-year to 86.4, reflecting Improved 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 could help further. Major financial institutions, including ANZ and NAB, anticipate policy easing, which is expected to reduce 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.
Pulling these threads together, the report describes Melbourne CBD as a place where rapid demographic expansion, generational infrastructure spending, and resilient rental performance meet, a combination that 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. Picking the right asset in the right pocket matters, and the report recommends consulting a qualified property strategist or financial advisor before committing capital.
Set the individual projections aside and the Urbis findings come down to a single tension: a city adding people and renters faster than it adds homes. Against a 60% supply deficit, that Imbalance is the central fact for anyone weighing Melbourne’s property market.
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