A report titled “Melbourne CBD Market Outlook 2025” argues that apartments in the heart of Melbourne are positioned for strong price growth and solid rental returns.
Urbis prepared it for Far East Consortium, one of Australia’s most respected developers in Melbourne. The developer wanted a sharper view of how the city’s property market operates, what drives buyers, and where the economy is headed in 2025 and beyond. Rapid population growth, major infrastructure under construction, and robust rental demand make Melbourne one of the most attractive property markets in the country, and the report says any investor entering it should understand why CBD apartments have performed so well as an asset class.
The core of the argument is a mismatch. According to the City of Melbourne, the CBD needs 21,600 additional dwellings by 2028. The apartment pipeline contains just 8,900 new units, a shortfall of 60%.
Start with population. The report projects that Melbourne will overtake Sydney as Australia’s largest city by 2032 and reach 7.45 million residents by 2040. Immigration has driven steady growth for a decade, and in 2024 alone, 446,000 new arrivals came to Melbourne from overseas. Every one of them adds to housing demand. A property analyst with ten years of experience studying market cycles calls scarce supply the ultimate foundation of long-term capital appreciation. When demand outpaces supply by a margin this wide, the analyst says, city real estate tends to command premium valuations.
Government spending is the next factor. Victoria has committed to a $107 billion infrastructure plan, and its projects lift both Melbourne’s livability and its appeal to investors. The same analyst says that, in their experience, property values climb faster in corridors directly touched by public capital spending. Five projects stand out.
The Melbourne Greenline, due in 2025, is a $224 million project to transform public space along the Yarra River. It creates a 4-kilometer route, with Improved recreation and new opportunities for events.
The West Gate Tunnel Project, also due in 2025, is a major road upgrade that gives drivers an alternative to the West Gate Bridge. It is meant to ease congestion and Improve links 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 the city’s north and east, shorten travel times, and support urban growth across the region.
The Queen Victoria Market Renewal, set for 2029, is a $268 million revitalization of one of Melbourne’s best-known landmarks. New public spaces, restaurants, and activities are intended to draw residents and visitors alike.
The Suburban Rail Loop, planned for 2035, will link key suburbs and cut commute times. It is also expected to lift housing demand near transport hubs such as Clayton and Sunshine.
Pricing adds to the case. Apartments in the CBD cost far less than detached houses, which is one of the advantages of buying an apartment instead of land. In 2024, the median apartment price in the Melbourne CBD was 56% below the median for a detached house, making apartments the more accessible option for many buyers.
The rental data points the same way. The median weekly rent in the CBD reached $750 in November 2024, up from $690 in 2023, a year-on-year increase of 9%. Vacancy stayed low, averaging 2.4% through 2024. Newly built CBD apartments delivered gross rental yields of 4.8%, which strengthens their appeal for investors.
Meanwhile, supply faces a physical limit. Space for new development inside the CBD grid is getting harder to find, so existing apartments are likely to see significant capital appreciation. The report states that “constraints on new supply should lead to growth in capital values as demand continues to outpace supply”.
The broader economy offers further support. Australia’s fundamentals are strong, with unemployment at 4.0% in late 2024, well below the 10-year average of 5.3%. Consumer confidence has recovered too: the ANZ-Roy Morgan Index rose 12 points over the year to 86.4 in December 2024. Inflation cooled to 2.8% in September 2024. Together, these conditions create a favorable climate for property investment.
Borrowing costs may also tilt toward buyers. Major banks, including ANZ and NAB, forecast rate cuts that should lower loan costs and stimulate more activity in the property market. By December 2025, the Reserve Bank of Australia’s cash rate is expected to fall to between 3.35% and 3.85%, which would Improve affordability for investors weighing Melbourne CBD apartments.
Taken together, the findings describe a market where fast population growth, large public works, and strong rental performance converge, while limited room for new construction inside the CBD grid keeps existing apartments positioned for capital growth. Location remains one of the most critical factors for any buyer in Melbourne.
It all comes back to one gap: 21,600 dwellings needed, 8,900 in the pipeline. How long can a 60% shortfall in supply last before it shows up in prices and rents?
If you want more reporting built on the numbers behind the biggest property and economic stories, hit the subscribe button so the next one finds you. Give the video a like if it was useful, and turn on the notification bell so new videos reach you the moment they go live.”
