The City of Melbourne estimates that 21,600 additional dwellings will be needed by 2028.
The apartment pipeline contains only 8,900 new units. That leaves a supply shortfall of 60%, and it is the sharpest finding in the Melbourne CBD Market Outlook 2025.
The report was commissioned by Far East Consortium, a developer with a strong reputation in the Melbourne market, and written by the research firm Urbis. Its brief covered three questions: how the city’s property market operates, what shapes the decisions buyers make, and where the economy is heading in 2025 and the years beyond.
Two projections set the scale of the city’s growth. Melbourne is expected to pass Sydney by 2032 and become the largest city in Australia. By 2040, its population is forecast to reach 7.45 million.
The analysis of these findings comes from an author who has worked in local real estate for ten years and through several market cycles. He calls the report’s data compelling and highly actionable for disciplined investors who are weighing commercial real estate finance against high-yield residential assets. In his assessment, Melbourne has moved beyond its identity as a lively cultural center and become an engine of wealth creation. He says population growth, large-scale infrastructure projects, and healthy rental demand together offer property investors long-term security and strong capital appreciation.
He starts with people. Immigration has driven steady population growth over the past decade, and in 2024 alone, 446,000 new arrivals came to the city from overseas. That inflow keeps housing demand high and has moved the baseline of housing affordability across inner-city suburbs. Because supply is not keeping pace, the author sees room for price growth and solid rental returns on CBD apartments. For anyone drawing up property portfolio management strategies, he considers a purchase in an undersupplied urban core one of the most dependable hedges against inflation, as well as a way to lock in predictable cash flow.
Public spending is his second theme. Major infrastructure projects make Melbourne a more livable city and a more attractive place to invest, and they carry real weight in property valuation models. The report highlights five of them.
The Melbourne Greenline is due in 2025. The $224 million project will reshape public space along the Yarra River and create a 4 km route with expanded recreation and event options, which in turn raises the value of neighboring residential property. The West Gate Tunnel Project is also scheduled for 2025. This major road upgrade gives drivers an alternative to the West Gate Bridge, eases congestion, and Improves connections between Melbourne’s west and the CBD.
The North East Link follows in 2028. It is the largest road project in Victoria’s history, linking key arterial roads in the city’s north and east, shortening travel times, and supporting urban growth across the region. The Queen Victoria Market Renewal is set for 2029. That $268 million revitalization of the iconic market will add new public spaces, restaurants, and activities that draw residents and visitors alike.
The Suburban Rail Loop is the furthest out, scheduled for 2035. It will connect key suburbs and shorten commutes, and it is expected to lift housing demand around transport hubs such as Clayton and Sunshine.
All five projects sit within Victoria’s $107 billion infrastructure plan, which strengthens Melbourne’s global appeal and drives long-term growth in property values. From a wealth advisory standpoint, the author says, owning real estate near state-backed infrastructure secures lasting tenant demand and shields capital through economic shifts.
Price is the next factor. CBD apartments carry a clear cost advantage, because affordability relative to detached housing is a core driver of demand and a major benefit of buying an apartment rather than land. In 2024, the median apartment price in the Melbourne CBD was 56% below the median for a detached house. That puts apartments within far easier reach of first-time buyers and institutional investors alike.
Rental data points the same way. The median weekly rent in the CBD reached $750 in November 2024, up from $690 in 2023, a robust 9% increase year-on-year. Vacancy stayed very low, averaging 2.4% across 2024. Newly built CBD apartments have delivered gross rental yields of 4.8%, which makes them more attractive to investors who want to optimize passive income through strategic acquisitions.
Scarcity reinforces all of this. Opportunities for new development inside the CBD grid are running out, so existing Melbourne CBD apartments are likely to see significant capital appreciation. According to the Melbourne CBD Market Outlook 2025, limits on new supply should deliver consistent growth in capital values, with demand continuing to comfortably outpace supply. For investors who study historical trends, scarcity in prime locations has always translated into superior mid-to-long-term returns.
The national economy supplies a stable footing as well. Australia’s strong fundamentals underpin Melbourne’s property market and provide a steady backdrop for leveraged investments and mortgage refinancing strategies. As of late 2024, unemployment stood at 4.0%, well below its 10-year average of 5.3%, which reflects a resilient labor market and robust corporate health.
Sentiment has strengthened too. The ANZ-Roy Morgan Index rose 12 points year-on-year to 86.4 in December 2024, and inflation fell to 2.8% in September 2024. Together, these trends have created a highly favorable environment for property investment and wealth accumulation.
Borrowing costs are expected to ease. Major banking institutions, including ANZ and NAB, have forecast interest rate cuts, which should lower the cost of borrowing and stimulate more activity in the residential property market. By December 2025, the Reserve Bank of Australia’s cash rate is anticipated to fall to between 3.35% and 3.85%. That would further Improve affordability and borrowing capacity for smart investors entering the market.
The author gathers this evidence into three pillars: rapid population growth, transformative infrastructure, and strong rental performance. The acute scarcity of new development inside the CBD grid sharpens the appeal and leaves existing Melbourne CBD apartments well positioned for sustained capital growth. He notes that building a diversified investment portfolio means working through the complexities of property acquisition, which calls for a clear strategy and a grasp of local market fundamentals. For investors who want to capitalize on Melbourne’s robust market dynamics, he argues, the time to act is now. His advice is to explore the potential of Melbourne CBD apartments and to consult a qualified property expert or financial advisor. That, he says, is how to secure a position in this thriving market and take the next step toward long-term financial independence.
The report’s figures all lead to the same place: 21,600 dwellings needed against 8,900 in the pipeline, a vacancy rate of 2.4%, and a population heading toward 7.45 million by 2040. How investors weigh those numbers against their own goals is the question that remains.
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