Melbourne’s central business district is heading toward a housing shortfall of 60 percent.
The City of Melbourne estimates the city will need 21,600 additional dwellings by 2028, while the apartment pipeline is expected to deliver only 8,900. That mismatch sits at the heart of a new property study, the “Melbourne CBD Market Outlook 2025.”
Urbis prepared the report for the Far East Consortium, a Melbourne-based developer regarded as one of the most respected in Australia. The company commissioned it to understand more clearly how the city’s property market works, what shapes buyers’ decisions, and where the economy is likely to head in 2025 and beyond.
The reading of the findings below comes from a real estate professional with ten years in the local sector, referred to here as the author. By his account, he has watched Melbourne grow from a lively cultural center into an engine of wealth creation. Having worked through many market cycles, he calls the report’s data compelling and highly actionable for capital allocators weighing commercial real estate finance and high-yield residential assets.
The report starts with people. Melbourne is on course to overtake Sydney as Australia’s largest city by 2032, and its population is projected to reach 7.45 million by 2040. Strong Immigration has pushed the numbers up steadily for a decade. In 2024 alone, 446,000 people arrived from overseas, adding to housing demand and shifting the baseline for affordability metrics across inner-city suburbs.
Set against that demand, the author views the 60 percent shortfall as a foundation for price growth and solid rental returns on CBD apartments. In his view, holding assets in an undersupplied urban core is among the more dependable ways to hedge against inflation and lock in predictable cash flow. He considers this an Important point when judging property portfolio management strategies.
Price is another driver. The author describes the affordability of CBD apartments relative to detached houses as a key source of demand and a main advantage of buying an apartment instead of land. In 2024, the median CBD apartment price was 56 percent below the median for a detached house. That gap opens the market to first-time buyers and institutional investors alike.
The rental data points the same way. The median weekly rent in the CBD reached $750 in November 2024, up from $690 in 2023, a year-on-year increase of 9 percent. Vacancy averaged just 2.4 percent through 2024, which supports those rents. Newly built CBD apartments have delivered gross rental yields of 4.8 percent, a figure the author says strengthens their appeal for investors building passive income through strategic acquisitions.
Available building space is tightening too. Because opportunities for new development inside the CBD grid are growing rarer, the author expects existing apartments to see significant capital appreciation. The report notes that limits on new supply should produce steady growth in capital values, provided demand stays comfortably ahead. Drawing on historical trends, he says scarcity in prime locations has consistently translated into superior mid-to-long-term returns.
Public spending on infrastructure strengthens the case. Major projects Improve Melbourne’s liveability and its draw for investors, and they weigh heavily in property valuation models. Five stand out.
First, the Melbourne Greenline, due in 2025. The $224 million project remakes public space along the Yarra River and creates a 4-kilometer route with more recreation and event opportunities. The author says it lifts the value of nearby residential property.
Also due in 2025 is the West Gate Tunnel Project, a major road upgrade that gives drivers an alternative to the West Gate Bridge. It eases congestion and tightens the connection between Melbourne’s west and the CBD.
The North East Link, scheduled for 2028, is the largest road project in Victoria. It joins key arterial roads in Melbourne’s north and east, shortens travel times, and supports urban growth across the region.
In 2029 comes the Queen Victoria Market Renewal, a $268 million revitalization of the city’s iconic market. It adds public spaces, restaurants, and activities designed to attract residents and visitors alike.
The Suburban Rail Loop, set for 2035, is a rail project that links key suburbs and cuts commute times. It is expected to increase housing demand around transport hubs such as Clayton and Sunshine.
All five fall under Victoria’s $107 billion infrastructure plan. The author says the plan enhances Melbourne’s global appeal and drives long-term growth in property values. From a wealth advisory perspective, he adds, real estate near state-backed infrastructure guarantees sustained tenant demand and protects capital during economic shifts.
The broader economy offers firm footing as well. The author says Australia’s strong fundamentals provide a steady backdrop for leveraged investments and mortgage refinancing strategies. In late 2024, unemployment stood at 4.0 percent, well under its 10-year average of 5.3 percent, which he reads as evidence of a resilient labor market and robust corporate health.
Sentiment has Improved. The ANZ-Roy Morgan consumer confidence index climbed 12 points from a year earlier to 86.4 in December 2024, while inflation dropped to 2.8 percent in September 2024. Together, the author says, these trends have created a highly favorable setting for property investment and wealth accumulation.
Borrowing may also get easier. Major banks, including ANZ and NAB, are forecast to cut interest rates, which should reduce borrowing costs and spur more activity in the residential market. The Reserve Bank of Australia’s cash rate is expected to fall to between 3.35 percent and 3.85 percent by December 2025, Improving affordability and borrowing capacity for investors entering the market.
The author closes with his own summary. Melbourne’s CBD combines rapid population growth with transformative infrastructure and strong rental performance, and the acute scarcity of new developments inside the CBD grid sharpens its appeal. In his assessment, existing apartments are exceptionally well positioned for sustained capital growth. He notes that a diversified portfolio requires a clear strategy and a firm grasp of local market fundamentals. For investors who want to capitalize on the city’s market dynamics, he says the time to act is now, and he recommends consulting a qualified property expert or financial advisor to secure a position and work toward long-term financial independence.
Boiled down, the report describes one Imbalance: a city adding residents faster than it can add apartments. Whether that Imbalance becomes lasting returns will depend on how Melbourne’s growth and the central bank’s rate path unfold in the years ahead.
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