Australia’s student housing market is facing a critical shortfall, new research from CBRE shows.
The Accommodating the Growth in Students report estimates that up to 180,000 additional Purpose-Built Student Accommodation (PBSA) beds are needed to accommodate students at the country’s leading universities.
CBRE’s Head of Pacific Research, Sameer Chopra, said the undersupply is creating a compelling investment case.
“Purpose-built student accommodation is still relatively new in Australia compared with the UK and US,” Mr Chopra said.
“But both the international and domestic student markets are expanding, and more Australians are willing to travel interstate for university. That’s adding to the demand base.”
Massive Bed Shortage Fuels Investor Interest
The CBRE analysis compared student renter numbers at 11 Australian universities with available PBSA beds and found that only about 6% of students currently have access to dedicated on- or near-campus housing.
While the existing pipeline will deliver 28,000 new beds between 2025 and 2028, the gap remains stark: about 10,000 in Melbourne’s CBD and inner north, and 25,000 in central and inner-west Sydney.
This structural undersupply is driving investor attention, particularly from both domestic and offshore capital targeting high-occupancy, resilient assets.
Mr Chopra said PBSA has initially clustered around universities such as Melbourne, RMIT, Sydney and the ANU; however, supply is now spreading to other cities.
“For investors, this is a very attractive opportunity,” he said.
“The key is to look beyond Melbourne and Sydney, because student accommodation is viable right across Australia.”
Rising Rents and Resilient Returns
Mr Chopra said that, unlike other real estate sectors, student housing has maintained strong occupancy and rental growth despite higher interest rates.
PBSA in Melbourne and Sydney has recorded a median rent growth of 5.5% CAGR between 2018 and 2024.
As the interest rate cycle softens, cap rate compression could further lift returns, strengthening the sector’s appeal.
With near-full occupancy, PBSA is proving to be a stable, defensive asset class.
“Rents are growing strongly because of demand, and investors are confident that if you build something new, it can be leased up to 95% in just a few months,” he said.
“There’s real confidence in this market.”
Development Pipeline and Future Growth
Rising student numbers, coupled with supply constraints, signal ongoing opportunities for investors seeking scale and resilient returns.
Mr Chopra said Australia’s position as a top-four global destination for international students was another pillar underpinning long-term sector growth.
“University rankings are extremely important when international students are deciding where to live and study,” he said.
“Cultural experience is also critical. Australia’s food, lifestyle and climate are huge drawcards—Brisbane’s weather, Melbourne’s culture—these things matter and they underpin the strength of the sector. Building that reputation takes time and shouldn’t be underestimated.”
Looking ahead, Mr Chopra expects demand to remain strong.
“Barring a major geopolitical shock, student accommodation should remain one of the top-performing sectors in Australia,” he said. “It’s proven to be very resilient.”
