Melbourne’s central business district is heading toward a supply gap.
The City of Melbourne estimates that the CBD will need 21,600 additional dwellings by 2028, yet the apartment projects now in the pipeline are expected to deliver only 8,900 units. Put another way, apartment supply is projected to fall 60% below demand.
Those figures come from “Melbourne CBD Market Outlook 2025,” a report that Urbis prepared for Far East Consortium. Far East Consortium is a Melbourne property developer regarded as one of the most respected in Australia. It commissioned the research to understand how the city’s property market operates, what shapes the behavior of buyers, and where the economy is headed in 2025 and beyond.
The analyst behind this review has spent ten years advising clients through the shifting real estate cycles of Victoria. That analyst says a better window for strategic acquisition has seldom opened. In this view, Melbourne CBD remains one of the most attractive property markets in Australia, backed by a growing population, transformative infrastructure projects, and strong rental demand. Reading that landscape well, the analyst adds, requires a firm grasp of local market fundamentals.
The first of those fundamentals is people. Melbourne is on track to overtake Sydney as Australia’s largest city by 2032, and its population is projected to reach 7.45 million by 2040. Immigration has driven steady growth over the past decade. In 2024 alone, 446,000 new overseas arrivals came to the city, adding further pressure on housing demand. For anyone weighing real estate investment trusts against direct property purchases, the structural undersupply described above underpins long-term capital appreciation.
Land is the second. Opportunities to build new developments within the CBD grid are becoming scarce, 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”.
Price of entry is the third. A CBD apartment sells for far less than a detached house, one of the advantages of buying an apartment rather than land. In 2024, the median apartment price in Melbourne CBD was 56% lower than the median price of a detached house, which puts ownership within reach of a wider pool of buyers.
Rental data points in the same direction. The median weekly rent in the CBD reached $750 in November 2024, up from $690 in 2023. That is a year-on-year increase of 9%. Vacancy stayed low, averaging 2.4% through 2024, and newly built apartments in the CBD have delivered strong gross rental yields of 4.8%. Comprehensive landlord insurance and thorough reviews of property management can help protect those yields from operational swings.
Public works add another layer of support. Several major infrastructure projects are strengthening Melbourne’s liveability and its appeal as an investment destination, and they arrive in a steady sequence over the next decade.
The Melbourne Greenline and the West Gate Tunnel Project are both due in 2025. The Greenline is a $224 million project that will convert public spaces along the Yarra River into a 4-kilometer route, expanding recreation and event opportunities. The West Gate Tunnel Project is a major road upgrade that gives drivers an alternative to the West Gate Bridge. It is designed to ease congestion and Improve connectivity between Melbourne’s west and the CBD.
The North East Link, scheduled for 2028, is the largest road project in Victoria’s history. It will join key arterial roads in Melbourne’s north and east, shorten travel times, and support urban growth across the region. The Queen Victoria Market Renewal follows in 2029. This $268 million revitalization of the city’s iconic market will add public spaces, restaurants, and activities meant to draw residents and visitors alike. The Suburban Rail Loop, due in 2035, will link key suburbs, shorten commutes, and lift housing demand near transport hubs such as Clayton and Sunshine.
All of these projects fall within Victoria’s $107 billion infrastructure plan, which raises Melbourne’s global profile and drives long-term growth in property values. Investors pursuing commercial real estate loans or residential mortgages will find that properties near these transit corridors consistently outperform broader market averages.
The national economy provides firm footing as well. As of late 2024, unemployment stood at 4.0%, well below the 10-year average of 5.3%, a sign of a resilient economy. Consumer confidence has also Improved markedly: the ANZ-Roy Morgan Index rose 12 points year-on-year to reach 86.4 in December 2024. That optimism, together with inflation easing to 2.8% in September 2024, has created a favorable climate for property investment.
Interest rates could add further momentum. Major banks, including ANZ and NAB, have forecast rate cuts that are expected to lower borrowing costs and stimulate more 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 Improve affordability for investors using home loans or investment property loans.
Taken together, rapid population growth, transformative infrastructure, and strong rental performance make Melbourne CBD an exceptional investment opportunity, according to the review. The scarcity of new developments within the CBD grid strengthens that case, because existing apartments are positioned for capital growth. Among the many factors to weigh when buying in Melbourne, location ranks among the most critical. For investors who want to capitalize on the city’s robust market dynamics, the analyst’s message is that the time to act is now. The advisory team invites readers to get in touch today to explore curated opportunities in Melbourne CBD apartments and to schedule a one-on-one portfolio consultation to secure a position in this thriving market.
The whole picture rests on one contrast: a city that needs 21,600 new dwellings by 2028 is set to receive just 8,900 apartments. With rents rising, the population growing, and a long line of public works under way, the open question is how that supply gap will shape the CBD market in the years ahead.
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