A 60% deficit in housing supply by 2028.
That is the figure anchoring a research report that Urbis produced for Far East Consortium, one of Australia’s most respected Melbourne property developers. The study, titled the “Melbourne CBD Market Outlook 2025,” looks at how the city’s property market operates, what drives buyer behavior, where the structural housing shortage sits, and which wider economic forces are supporting Melbourne real estate. Its verdict: 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 shortage itself is the place to begin. The City of Melbourne estimates that 21,600 additional dwellings will be needed by 2028. Only 8,900 new apartments are expected to be completed in that window. The distance between homes required and homes arriving works out to a 60% deficit. The report treats that gap as a sign of potential for sustained price growth and solid rental returns on CBD apartments. Scarcity combined with population pressure, it says, is precisely what experienced buyers look for when building high-yield portfolios.
Population explains the pressure. Melbourne received 446,000 new overseas arrivals in 2024 alone. Urbis projects that the city will pass Sydney to become Australia’s largest by 2032, and that its population will reach 7.45 million by 2040. Over the last decade, growth has held steady at a strong pace, fueled mainly by international Immigration and by people moving in from other states.
Government spending is the report’s second pillar. A series of major projects is reshaping the city, and the report links each one to Melbourne’s liveability, economic resilience, and lasting appeal as an investment destination.
Two projects are due in 2025. The Melbourne Greenline, a $224 million undertaking, converts public space along the Yarra River into a scenic 4-kilometer route, opening new possibilities for recreation, lifestyle activity, and commercial events. The West Gate Tunnel Project gives 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 North East Link arrives in 2028. It is Victoria’s largest integrated road engineering project, tying together key arterial routes across Melbourne’s north and east, cutting travel times, and supporting coordinated urban growth in the region. Next comes 2029, when 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 intended to draw permanent residents and international tourists alike. Last on the timeline is the Suburban Rail Loop, targeted for 2035. This multi-billion-dollar rail initiative links key middle-ring suburbs, shortens commutes, and is expected to generate heavy housing demand near high-density transport hubs such as Clayton and Sunshine.
Together, these projects form 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.
Prices and rents show why apartments in particular attract attention. Affordability limits in traditional housing markets have changed 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% below that of a detached house. High-rise units therefore offer first-time buyers and institutional investors a much more accessible entry point, and they illustrate one of the core financial advantages an apartment holds over standalone land.
Rents in the inner city climbed over the same period. Median weekly rent rose 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 strengthens their cash flow appeal in an inflationary climate.
Limited supply also Improves the outlook for existing stock. Room 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, because rental and buyer demand will outstrip available inventory.
The wider economy lends further support. Macroeconomic indicators shape the health of both commercial and residential property, and Australia’s economic fundamentals remain resilient. Unemployment holds steady at 4.0%, comfortably below the 10-year historical average of 5.3%, pointing to a robust labor market. Consumer confidence has recovered as well. The ANZ-Roy Morgan Index gained 12 points year-on-year to reach 86.4, reflecting Improved sentiment among households and business owners. With inflation cooling to 2.8%, conditions have become more favorable for property purchases and leveraged wealth building.
Monetary policy may add 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.
Taken as a whole, the Melbourne CBD pairs rapid demographic expansion with generational infrastructure spending and resilient rental performance. That combination, 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. Choosing the right asset in the right pocket matters, and the report recommends consulting a qualified property strategist or financial advisor before committing capital.
Every finding in the Urbis study traces back to one tension: a city adding residents and rental demand faster than it can build apartments. Against a 60% supply deficit, that mismatch is the central fact for anyone following Melbourne’s property market. As 2028 draws closer, one question stays open: will construction ever catch up with the people arriving?
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