Sixty percent.
That is the shortfall in Melbourne’s apartment supply, and it anchors the case that the Melbourne CBD is among the most attractive property markets in Australia. Population growth, large-scale infrastructure, and strong rental demand all point in one direction. Reading that landscape correctly requires a solid grasp of local market fundamentals, financial planning, and economic trends.
To clarify how the city’s property market works, what drives buyers, and where the economy is heading in 2025 and beyond, Far East Consortium, one of Melbourne’s most respected property developers, commissioned Urbis to produce the “Melbourne CBD Market Outlook 2025” report.
Start with the economy, which the report treats as the foundation. As of late 2024, unemployment stood at 4.0 percent, well under the 10-year average of 5.3 percent, a sign of a resilient national economy. Consumer confidence has also recovered markedly. The ANZ-Roy Morgan Index climbed 12 points year-on-year to 86.4 in December 2024. Add inflation easing to 2.8 percent in September 2024, and the result is a favorable climate for property investment and wealth management advisory services.
Borrowing costs are expected to ease as well. Major banks, including ANZ and NAB, forecast rate cuts that should reduce the cost of borrowing and spur 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 percent and 3.85 percent. That would Improve affordability further for investors using mortgage broker services or commercial real estate loans.
Now the people. According to the report, Melbourne is on course to pass Sydney as Australia’s largest city by 2032, with its population projected to hit 7.45 million by 2040. Immigration has fueled steady growth over the past decade, and in 2024 alone the city took in 446,000 new overseas arrivals, adding to housing demand. The City of Melbourne estimates that 21,600 more dwellings will be required by 2028. The current apartment pipeline, however, includes only 8,900 new apartments. That gap is the 60 percent shortfall. The mismatch points to considerable potential for price growth and rental returns on CBD apartments. For anyone weighing a real estate investment, understanding demographic shifts is essential to building long-term wealth through property.
Public spending reinforces the picture. A series of major projects is strengthening Melbourne’s liveability and its standing as an investment destination. The Melbourne Greenline, due in 2025, is a $224 million project that will turn public space along the Yarra River into a 4 km corridor with expanded recreation and event opportunities. The West Gate Tunnel Project, also due in 2025, 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 join key arterial roads in Melbourne’s north and east, cut travel times, and support urban growth across the region. In 2029, the Queen Victoria Market Renewal, a $268 million revitalization of the city’s iconic market, will bring new public spaces, restaurants, and activities to draw residents and visitors. The Suburban Rail Loop, set for 2035, will link key suburbs and shorten commutes. It is also expected to lift housing demand near transport hubs such as Clayton and Sunshine.
Every one of these projects sits within 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, CBD apartments hold a clear advantage. Affordability is a major source of demand, and it shows one benefit of buying an apartment instead of land. In 2024, the median price of a CBD apartment was 56 percent below that of a detached house, putting apartments within reach of buyers chasing high rental yields.
Rental figures tell a similar story. Median weekly rent in the CBD rose to $750 in November 2024, up 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 benefit existing stock. Opportunities for new development inside the CBD grid are getting harder to find, so existing apartments are likely to see significant capital appreciation. The Melbourne CBD Market Outlook 2025 report notes that limits on new supply should lift capital values as demand keeps outpacing supply. Effective property portfolio diversification strategies often begin with securing high-performing urban assets such as Melbourne CBD apartments.
Taken together, rapid population growth, transformative infrastructure, and strong rental performance make the Melbourne CBD an exceptional investment opportunity, and the shortage of new development within the grid only adds to its appeal. Buyers have many factors to weigh when purchasing in Melbourne, and location ranks among the most critical. Working with a qualified financial advisor or buyer’s agent helps keep a portfolio aligned with current macroeconomic shifts. For investors looking to capitalize on the strength of Melbourne’s market, the time to act is now.
Return to where this began: a 60 percent supply shortfall, a $107 billion infrastructure plan, and rents up 9 percent in a single year. Each one describes a market where demand is running ahead of supply. The open question is how fast the pipeline can respond to a city expected to reach 7.45 million people by 2040.
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