While Melbourne has several high-profile PBSA developments in the pipeline, are these additional beds enough to keep up with a growing higher education sector amidst broader dwelling supply shortages?
Melbourne: A Metropolis for International Students
Melbourne has become a shining beacon for international students seeking quality education and a vibrant life experience. Even in the wake of COVID-19 disruptions, the city has successfully reopened its doors, welcoming back international students in soaring numbers. Garnering the title of Australia’s “best student city” from QS rankings since 2015 and currently ranked 5th globally, trailing only behind London, Tokyo, Seoul, and Munich, Melbourne’s appeal remains strong.
The long-term strength of Melbourne’s educational ecosystem is particularly evident in the Purpose-Built Student Accommodation (PBSA) sector. The city accounts for an impressive 42% of Australia’s national PBSA bed supply, driven by a robust international student population, with an average of 8.67 students per PBSA bed—significantly higher than the national average of 7.27.
One of the unique facets of Melbourne’s educational landscape is its well-defined student living precinct, strategically located at the Northern end of the Central Business District (CBD). This area flows into North Melbourne and Carlton, centered around the urban campuses of the University of Melbourne and RMIT. This integration of academic infrastructure with contemporary student accommodation establishes a preferred destination for international learners, as well as for student housing operators and investors.
Noral Wild, CEO of Cushman & Wakefield Australia & New Zealand, acknowledges this synergy: “Melbourne’s thriving centralized student precinct has long been recognised by investors and operators as a unique feature that supports the success of student accommodation assets. It’s not just the concentration of universities—it’s the vibrancy, connectivity, and strong track record of underlying demand from international students that sets Melbourne apart.”
Scape, the largest owner and operator of PBSA in Australia, echoes this sentiment. Anouk Darling, Scape’s CEO, reports, “solid leasing velocity and consistent rental growth year on year across the Melbourne portfolio.” She emphasizes that Melbourne’s reputation as a global education hub fuels demand, as international students seek high-quality, centrally located housing with safety, amenities, and a community-oriented environment.
Do We Have Enough Supply?
While exciting new developments are underway, questions loom about whether Melbourne’s current PBSA supply can keep pace with rising demand. Operators are reporting high occupancy levels and escalating rental rates, creating an urgent need for more beds. Currently, there are approximately 700 beds under construction across three projects, with an additional ~3,000 beds in earlier stages of development. This, however, constitutes only 8.2% of the existing operational stock—a marked contrast to Sydney, where the development pipeline accounts for 18.6% of current PBSA beds.
Despite its status as Australia’s largest PBSA market, a significant gap persists between the potential demand pool and available supply. Research from Cushman & Wakefield indicates a possible shortfall of up to 200,000 appropriate student housing beds based on 2023 enrollment levels. This discrepancy raises important concerns about the housing landscape for students in Melbourne.
Although full-year enrollment data for 2024 from the Department of Education has yet to be released, early indicators hint at sustained momentum. For instance, the University of Melbourne has reported a 12% increase in international enrollments, while RMIT noted a 17% uplift—despite earlier headlines and proposed policy measures aiming to curb international student enrollments.
Further complicating the supply challenge is the fact that many of Melbourne’s leading universities are landlocked, leaving them with limited capacity to expand their on-campus accommodation offerings. Historically, domestic students have turned to university-owned housing, but with physical constraints now limiting further development, these institutions are increasingly collaborating with private PBSA operators to meet the growing demand. This trend coincides with a rise in domestic students relocating for education, amplifying demand pressures that extend beyond just international cohorts. Public-private partnerships are essential to ensure that both domestic and international students have access to adequate and conveniently located accommodation.
Why This Matters – And What Can Be Done
The impact of an undersupplied PBSA market reaches far beyond the international student population. An increasing number of domestic students are gravitating toward PBSA options, driven by pressures in the private rental market. In 2009, under 10% of Australian students were studying out-of-state, but statistics from 2023 reveal that nearly 20% now attend universities outside their home state, further fueling underlying demand.
Purpose-built student housing not only provides secure and community-focused accommodation but also alleviates pressure on the broader rental market. Given that the average Australian household contains 3.1 bedrooms, the introduction of 3,000 new PBSA beds could potentially set free around 950 dwellings for families, essential workers, and the general population within inner Melbourne.
In light of these compelling figures, it is crucial for policymakers to recognize PBSA not merely as student infrastructure but as a critical part of Melbourne’s broader urban housing landscape. To ensure a sustainable pipeline of appropriately located PBSA, policymakers must work to remove planning approval barriers, foster institutional investment, and support long-term development initiatives.
The provision of adequate PBSA is not merely an educational issue; it’s an economic and social imperative. A strategic, coordinated approach to securing a thriving PBSA sector is essential for maintaining Melbourne’s global competitiveness and livability.