Start with a single number: 60 percent.
That is the size of the supply deficit facing Melbourne’s apartment market, and it sits at the center of the argument that Melbourne CBD remains one of Australia’s most attractive property markets. Population growth, major infrastructure projects, and strong rental demand all point the same way. Making sense of that landscape takes a firm grasp of local market fundamentals, financial planning, and economic trends.
To get a clearer picture of how the city’s property market works, what shapes buyer behavior, and where the economy is headed in 2025 and beyond, Far East Consortium, one of the most respected property developers in Melbourne, commissioned Urbis to prepare the “Melbourne CBD Market Outlook 2025” report.
The supply gap begins with people. According to that report, 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 across the past decade. In 2024 alone, Melbourne received 446,000 new overseas arrivals, adding to housing demand. The City of Melbourne estimates that 21,600 additional dwellings will be needed by 2028. The current apartment pipeline expects only 8,900 new apartments, which leaves the 60 percent shortfall. This mismatch suggests significant potential for price growth and rental returns on Melbourne CBD apartments. For anyone weighing a real estate investment, an understanding of demographic shifts is essential to building long-term wealth through property.
Public investment adds to the picture. Several major projects are reinforcing Melbourne’s liveability and its standing as an investment destination. The Melbourne Greenline, due in 2025, is a $224 million project that will transform public spaces along the Yarra River into a 4 km corridor with expanded recreation and event opportunities. Also due in 2025, the West Gate Tunnel Project is a major road upgrade that will give drivers an alternative to the West Gate Bridge, easing congestion and Improving 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 connect key arterial roads in Melbourne’s north and east, cutting travel times and supporting urban growth across the region. In 2029, the Queen Victoria Market Renewal, a $268 million revitalization of Melbourne’s iconic market, will add new public spaces, restaurants, and activities to attract residents and visitors. The Suburban Rail Loop, set for 2035, will connect key suburbs and shorten commute times. It is also expected to lift housing demand near transport hubs such as Clayton and Sunshine.
All of these projects belong to Victoria’s $107 billion infrastructure plan, which strengthens Melbourne’s global appeal and drives long-term growth in property values. For astute investors, proximity to these transport networks correlates directly with higher tenant retention and sustainable capital appreciation.
Against that backdrop, apartments in the CBD have a clear edge. Affordability is a major source of demand, and it illustrates one of the advantages of buying an apartment over land. In 2024, the median price of a CBD apartment was 56 percent lower than that of a detached house, which made apartments a more accessible option for buyers pursuing high rental yields.
Rents tell a similar story. Median weekly rent in the CBD climbed to $750 in November 2024, from $690 in 2023, a 9 percent year-on-year increase. The vacancy rate averaged a low 2.4 percent in 2024, and newly built CBD apartments achieved gross rental yields of 4.8 percent.
Scarcity may also work in favor of existing stock. Opportunities for new development within the CBD grid are becoming harder to find, so existing apartments are likely to see significant capital appreciation. The Melbourne CBD Market Outlook 2025 report notes that constraints on new supply should lift capital values as demand continues to outpace supply. Effective property portfolio diversification strategies often begin with securing high-performing urban assets such as Melbourne CBD apartments.
The national economy provides a foundation for all of this. As of late 2024, unemployment stood at 4.0 percent, well below the 10-year average of 5.3 percent, a sign of the country’s resilient economy. Consumer confidence has Improved markedly as well. The ANZ-Roy Morgan Index rose 12 points year-on-year to reach 86.4 in December 2024. That positive sentiment, combined with inflation falling to 2.8 percent in September 2024, has created a favorable environment for property investment and wealth management advisory services.
Interest rates are expected to ease too. Major banks, including ANZ and NAB, forecast rate cuts that should lower borrowing costs and stimulate greater activity in the property market. By December 2025, the Reserve Bank of Australia’s cash rate is anticipated to fall to between 3.35 percent and 3.85 percent, which would further Improve affordability for investors using mortgage broker services or commercial real estate loans.
Taken together, rapid population growth, transformative infrastructure, and strong rental performance make Melbourne CBD an exceptional investment opportunity, and the scarcity of new development within the CBD grid only adds to its appeal. Buyers have many factors to weigh when purchasing in Melbourne, and location is among the most critical. Working with a qualified financial advisor or buyer’s agent helps ensure a portfolio stays aligned with current macroeconomic shifts. For investors looking to capitalize on the strength of Melbourne’s market, the time to act is now.
To sum up, a 60 percent supply shortfall, a $107 billion infrastructure plan, and rents rising 9 percent in a year all point toward a market where demand is outrunning supply. The open question is how quickly the pipeline can respond to a city expected to reach 7.45 million people by 2040.
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