Here is the number driving a new report on central Melbourne: 60 percent.
That is the size of the shortfall between the homes the city needs and the homes now being built. The City of Melbourne projects demand for 21,600 additional dwellings by 2028, while the residential apartment pipeline is on track to deliver only 8,900.
The figure comes from the “Melbourne CBD Market Outlook 2025,” a study by the research firm Urbis. Far East Consortium, a well-known Melbourne property developer, commissioned it. The report examines how the market is shifting, what shapes buyer behavior, and how the wider economy may influence 2025 and the years that follow. Its central finding is that the inner-city core of Victoria’s capital has proven resilient through market cycles. Population growth, major infrastructure projects, and strong rental demand back that finding, according to the report, and together they make the area attractive to investors building wealth over the long term. The argument rests on three pillars, with several supporting factors.
Population comes first. The report says Melbourne is on track to overtake Sydney as Australia’s largest city by 2032, and it projects 7.45 million residents by 2040. International Immigration has driven most of the growth over the past decade. In 2024 alone, 446,000 new overseas arrivals settled in Melbourne, and each needs housing, which feeds directly into demand for CBD property. Set against the supply figures above, the Imbalance is stark. For that reason, the report sees strong potential for accelerated capital growth and solid rental returns on Melbourne apartments.
Infrastructure is the second pillar. The report describes a series of major projects that are changing how the city connects and raising property values along key corridors. It also expects them to Improve Melbourne’s livability and reinforce its long-term standing as a high-yield investment destination.
Two projects are due in 2025. The Melbourne Greenline is a $224 million initiative that will turn public space along the Yarra River into a linear park 4 kilometers long, bringing new recreational and commercial opportunities. The West Gate Tunnel Project is a critical road upgrade. It gives drivers a vital alternative to the West Gate Bridge, eases congestion, and streamlines freight and passenger movement between Melbourne’s western precincts and the CBD.
The North East Link arrives in 2028. As the largest road project in Victoria’s history, it will connect major arterial routes across Melbourne’s north and east, cut travel times, and support decentralized urban growth. The Queen Victoria Market Renewal is scheduled for 2029. That $268 million revitalization of the city’s historic marketplace will add new public plazas, dining districts, and community hubs meant to draw residents and tourists alike.
The Suburban Rail Loop, slated for 2035, is a multi-billion-dollar transit project that will link middle-ring suburbs. It is expected to shorten commutes and boost housing demand near strategic transport hubs such as Clayton and Sunshine. Every one of these projects falls within Victoria’s $107 billion infrastructure pipeline, which the report credits with strengthening Melbourne’s global competitiveness and supporting property value growth for CBD apartments.
Affordability and rental performance make up the third pillar. The report calls affordability a primary catalyst for inner-city housing demand. In 2024, the median price of a CBD apartment sat roughly 56 percent below that of a detached suburban house, so high-density property offers an accessible entry point for experienced buyers and first-time investors alike.
Rental demand in the CBD core has also reached unprecedented levels. The median weekly rent rose to $750 in late 2024, up from $690 a year earlier, an increase of 9 percent. Vacancy averages just 2.4 percent, and that lasting tightness underpins the momentum. Newly built CBD apartments have consistently delivered strong gross rental yields, averaging 4.8 percent, which the report says reinforces their defensive qualities in a portfolio exposed to inflation.
Land supply is a further factor. Prime parcels inside the CBD grid are becoming scarcer, which positions existing stock for significant capital appreciation. The report notes that strict limits on new supply will naturally push capital values higher as buyers compete harder.
The broader economy, in the report’s words, provides a stable macroeconomic floor. Australia’s national unemployment rate is near a healthy 4.0 percent, comfortably below its 10-year historical average of 5.3 percent. Consumer sentiment has visibly rebounded as well. The ANZ-Roy Morgan Index gained 12 points year on year to reach 86.4, helped by inflation cooling to 2.8 percent.
Major financial institutions also expect the Reserve Bank of Australia to cut interest rates, lowering the cash rate toward a range of 3.35 percent to 3.85 percent. Borrowing costs are therefore set to moderate. According to the report, this easing cycle will release pent-up buyer demand and accelerate market activity across Victoria.
Drawing these threads together, the report characterizes rapid demographic expansion, heavy infrastructure spending, and exceptional rental performance as an elite investment proposition for the Melbourne CBD. Because future high-density development in the central grid is fundamentally scarce, it concludes that well-located residential assets are uniquely positioned to outperform over the long term. It adds that choosing the right asset class and location is paramount, and it advises buyers to consult a qualified property strategist or financial advisor before exploring CBD investment opportunities.
The report’s numbers all point the same way. A 60 percent apartment shortfall, a population heading toward 7.45 million, and a $107 billion infrastructure pipeline together indicate that demand for central Melbourne housing is outpacing the city’s capacity to build.
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