What is the effect of the number of overseas students?
There were over 1.6 million students enrolled in Australian universities in 2023, of which a quarter were international and three quarters domestic students. Although the majority local students live in their family home and some international students are with families under homestay arrangements, there are many others who rent a room in a share house or live in student accommodation, which can be either on or off-campus. There have been competing claims about the effect of international students on the rental market, with some arguing it is not significant while others maintain they are crowding out other renters and driving rents up.
There is limited data on the effect of the number of university students on rental markets in Australia. How significant are international students in the demand for rental property? This post looks at the available data from different sources in an attempt to answer that question. It discusses the exclusion of student accommodation from ABS housing statistics and the number of dwellings, and the factors that have been affecting the market for rental accommodation over the last few years.
Students, Migration and Rents
The Australian Bureau of Statistics tracks Overseas Arrivals and Departures by visa group which includes temporary student visas. This is high level data, and as shown in Figure 1 the numbers have grown significantly over the last few years. In the two years 2022 and 2023, 945,000 overseas students arrived in Australia, followed by 708,110 in 2024. According to the Department of Education 2023, about half of these international students are at a university and half are in the VET system.
One of the obvious problems associated with the number of international students is the Commonwealth Government’s lack of control over their number, because it is the universities that process and accept applications and therefore determine how many will commence each year. As Commonwealth funding for domestic students and research has declined, Australian universities have come to rely on the income from international students.
Figure 1. Overseas student arrivals and departures
Source: ABS 3401
Of the over 739,000 overseas students who arrived between 2021 and 2023, there were 409,248 of them enrolled at university in 2023. According to the Department of Education in 2023 for Australian universities:
· Total student enrolment was 1,600,563;
· Domestic enrolments were 1,076,027 (86,000 less than 2021 and the lowest level since 2017);
· Overseas students were 409,249.
Figure 2. University student numbers 2014-2023
Source: Department of Education 2023
Rents in Australia began rising in 2022, as shown in Figure 2, and the core issue is the effect of these international students on the rental market in Australia. That, however, is not obvious and there is a lot of noise in the data. Firstly, it is the difference between arrivals and departures that affect demand for housing, and that is nowhere near the size of the total for arrivals. Since 2019 the net difference has been just under 110,000 students, although the difference for the 2022 and 2023 years when rents were increasing rapidly was 168,200. Correlation, however, is not causation.
Second, inflation peaked at over 7% in December 2022. As Figure 3 shows, the rise in rents started after CPI began to increase. Then, due to the effect of lease terms, rents took a year longer to adjust before the rent index levelled out. Overall, since 2020 the total increase in the rent index was similar to the increase in the CPI.
Figure 3. Australia Consumer Price Index
Source: ABS 6401
Third, two other factors affected the rental market. These were a decrease in household size and a decline in residential building. A 2023 RBA Bulletin article found the ‘decline in average household size since the start of 2020 – around 1 per cent – is estimated to have contributed to around 120,000 additional households being formed and, as a result, additional demand in the rental market.’ As a result, since 2020 vacancy rates have been low and the article also found ‘Growth in the stock of total dwellings has slowed in recent years, reflecting a slowdown in apartment construction after strong growth in the mid-2010s. This is important for rental supply, as about half of the total stock of apartments are rented out.’
Figure 4. Vacancy rates
Source: Proptrack
Finally, there has been a rapid increase in the total resident population from immigrants. There was a net gain of 2,948,500 permanent migrants between January 2022 and December 2024, almost 2.8 million people greater than the 177,240 net number of temporary students over that period. Because of their number, these permanent visa holders will have had a much larger effect on the rental market than students because they typically rent before purchasing a home.
Figure 5. Population and dwelling totals
Source: ABS 3101 and 6432.
ABS Housing Statistics
One of the anomalies in Australian housing statistics is that student accommodation is not included. The ABS classifies student accommodation as non-residential building, and a recent ABS release on student accommodation approvals has highlighted the problem. In March the ABS released an estimate of student accommodation approvals in Australia between 2021-22 and 2023-24, when a total of 9,759 student accommodation rooms were approved for construction. Approvals were 1,684 rooms in 2021-22, then 2,897 in 2022-23, and 5,178 in 2023-24. This was the first time the ABS has collected this data.
This was the first time these estimates have been published, and the ABS explained ‘Purpose-Built Student Accommodation (PBSA) is student accommodation built for the purpose of providing sleeping quarters for students. These types of buildings are captured within the ABS’ Building Approvals publication as non-residential building jobs because they are not classified as a residential building job using the Functional Classification of Buildings (FCB).’ In the FCB, student accommodation is in two non-residential classifications:
· FCB 411 Education buildings: This is typically used when the student accommodation is owned by the university.
· FCB 462 Hotels, motels, boarding houses or lodges: This is typically used for student accommodation owned and managed independent of the university (such as a residential college).
The ABS notes ‘there is no associated count of dwellings for PBSA captured within the Building Approvals publication. Likewise, PBSA does not have a unique and distinct category for which building value estimates are published; instead, the value of a PBSA job contributes to the higher level aggregate non-residential series along with other non-residential building jobs. This makes understanding the size or potential growth of PBSA not readily available from the Building Approvals publication.’
There are over 11 million dwellings in Australia, so the PBSA percentage could be around one percent of the total, depending on the actual number of rooms. However, if only a third of dwellings are available for rent, then the PBSE share would be more significant at three percent.
Purpose Built Student Accommodation
There are several reports on the student accommodation market from real estate agencies. Their numbers differ on both the total and distribution of beds {note the ABS had approvals for rooms). There are up to 130,000 beds in PBSA, but how many are filled by international students is unknown.
A CBRE report in July 2024 estimated a total of about 102,000 beds and 41,000 rooms in PBSA , and claimed ‘ student accommodation in Australia is ~6% or one bed per 15 higher education students.’ They had the figure for beds below.
Figure 6. Location of PSBA beds
A report in November 2024 from the Property Council and Urbis found ‘there are currently 132,700 student accommodation beds in Australia, over half (53 per cent) of which are owned or managed by the private PBSA sector. This is a 90 per cent growth on the number of beds a decade ago.’ Across the states Victoria had 43,982 beds, New South Wales 34,069 beds, Queensland 23,353, the ACT 10,226 and South Australia 9,133. There were 29,500 beds in the supply pipeline, with around 7,400 beds in the construction stage, with 14,900 beds approved for development and nearly 7,200 beds waiting development approval.
Another report from Savills in June 2024 divided the ‘operational beds’ into those run by managers (61,785) and those run by operators (80,553). The total was 142,338 with 32,482 in the pipeline to 2027. However, Scape was included in both groups, so the numbers should be adjusted for the double counting of their 18,900 beds and 3,600 in the pipeline. That gives 123,438 current and 28,882 in the pipeline, with 43% of operational beds managed. No definition of ‘managers’ and ‘operators’ was given. Savills’ estimates are higher than CBRE’s but comparable to those from Urbis and the Property Council.
University Owned Accommodation
The number of rooms and beds managed by universities is a data black spot. These are university residences (self-catered rooms) and residential colleges (rooms with meals and laundry provided). There are over 60 residential University Colleges and Halls that are members of University Colleges Australia (UCA).
Large city universities like Sydney and Melbourne might have between five and ten residences. ANU has 18, and Charles Stuart University has 23 residences across six campuses. There are 16 universities with 40,000 or more students enrolled, and 17 with 20,000 to 40,000 enrolled. A conservative estimate of the total number of beds would be 50,000, but there probably is more.
Longitudinal Surveys of Australian Youth
Most international students are in the same age group as domestic students, and many students from both groups will therefore be looking for rental accommodation. There is some data on domestic students in the Longitudinal Surveys of Australian Youth (LSAY), which track young people as they move from school into study and work. Participants enter the study at 15 years old and are contacted once a year until they are 25. Survey participants are a 'cohort', the first was 1995 followed by 1998, 2003, 2006 and 2009. The current cohort ran from 2015 with 14,530 participants to 2025 with 2,996 participants, when they were 23 years old. The education and living arrangements data below is weighted based on the survey sample.
The peak years for university for this cohort were in 2019 at 43% and in 2020 with 46%. In the years on either side of 2018 and 2021 the proportion and number of the cohort studying a bachelors degree was 35%. The survey does not have more specific data on students who are renting, however the proportion and number of the cohort renting in 2018 was 7.2%, in 2019 was 12%, in 2020 was 16%, and in 2021 was 25% The data for renting in 2022 was 29.8% and 2023 was 31.4%, and in those years was close to the percentage in de facto relationships.
The survey data indicates the great majority of domestic university students live with their family while studying, which suggests many of those renting will be studying at a university not in their home city. Some unknown proportion of them will be in a university college. An estimate based on the LSAY percentages would be 35 to 40,0000 domestic students renting accommodation each year, but that may not be very accurate because the number of survey respondents drops away after school and the sample becomes smaller and less representative.
Other Research
A survey by Mandala for the Student Accommodation Council in 2024 found international students make up 7% of the rental market in Victoria, 6% in NSW and WA, and 5% or less in the other states. The report also found a quarter of international students live outside the rental market and 14% are in private student-only accommodation. The report argued against capping international student numbers because that would ‘only reduce this by 0.6% and have little impact on rental availability.’ The Student Accommodation Council is part of the Property Council and represents the private providers of PBSA, so the survey has to be seen in that context.
A 2025 journal paper by Michael Mu and Hannah Soong on international students and the rental market investigated ‘the statistical relationship between international student numbers and rental costs for local residents, while accounting for vacancy rate and rental inflation.’ The paper concluded ‘international students were not the culprits of the rental crisis in Australia … the effect of purpose-built student accommodation on the housing market remains unknown until pertinent data are made available for further research. Government discourses also scapegoat international students for the rental crisis, throwing them under a bus for political reasons.’ This research uses statistics and models so the result is not conclusive, because models reflect assumptions and parameters. However, this research found a weak relationship between international student numbers and rents.
Conclusion
Both rents and international student numbers began rising in 2022, however the effect of those students on the Australian rental market is not obvious. Claims that international students are crowding out other renters use the total number of overseas students, whose numbers have grown significantly over the last few years. In 2022 and 2023 a total of 945,000 overseas students arrived in Australia, followed by another 708,110 in 2024. About half of international students are at university and half in the VET system. However, combining student accommodation, homestays and living with friends and family, between a third and a half of international students will probably not be in the wider rental market. This is the first bit of unknown data.
The ABS classification of residential buildings excludes short-term commercial accommodation, communal accommodation, and housing for students. Student accommodation is classified as a Non-Private Dwelling and defined as non-residential because it is not long-term accommodation. Educational buildings include student accommodation co-located on the grounds of the establishment. Not including student accommodation in housing statistics is the second bit of unknown data. In March the ABS released an estimate of approvals for 2021-22 and 2023-24, when a total of 9,759 student accommodation rooms were approved for construction,the first time the ABS has collected this data. There are reports on the student accommodation market from real estate agencies, but their numbers differ on both the total and distribution of beds.
The most recent data for 2023 had over 1.6 million students enrolled in Australian universities, of which 409,249 were international and three quarters domestic students. The great majority of local students live in the family home, some international students have homestay arrangements, while others rent a room in a share house or live in student accommodation, which can be either on or off-campus. There are perhaps 130,000 beds in purpose built student accommodation with around half in university residences, but how many are filled by domestic students and how many by international students is the third bit of unknown data.
What crowding out claims overlook is that the difference between student arrivals and departures affects demand for rental accommodation from year to year. For the 2022 and 2023 years, when rents were increasing rapidly, the difference was 168,200. The majority of international students are in Melbourne and Sydney, so they will have local effects on the rental market in suburbs around universities in those cities, which will have affected domestic students looking for rental accommodation.
However, there were other factors affecting the rental market at the time, such as a decrease in household size and the decline in residential building. The decrease in average household size since 2020 added around 120,000 households to demand in the rental market. Falling apartment construction affected supply, as about half of the total stock of apartments are rented.
Also, there was a net gain of 2,948,500 permanent migrants between January 2022 and December 2024, almost 2.8 million people greater than the 177,240 net number of temporary students over that period. Because of their number, these permanent visa holders will have had a much larger effect on the rental market than students because they typically rent before purchasing a home.
Importantly, rents followed inflation, which peaked at over 7% in the December quarter 2022. The rise in rents started after the CPI began to increase in 2020, but since then the total increase in the ABS rent index is similar to the increase in the CPI. As the Reserve Bank raised interest rates to counter this surge in inflation, the cost of investor loans for rental properties increased, and the combination of high inflation and interest rates with a large number of new permanent migrants will have had much greater impact on rents and the rental market than the number of international students.
There are over 11 million dwellings in Australia, so the PBSA percentage could be around one percent of the total, but if only a third of dwellings are available for rent the PBSA share would be more significant at up to three percent. Excluding these rooms from housing statistics is a problem, particularly when there are claims international students are crowding out domestic renters.
While the concentration of international students in Sydney and Melbourne affects local rental markets, these temporary migrants are not the main cause of the low vacancy rate or the increase in rents in Australia. The fundamental problem is the slow pace of new residential building resulting in a shortage in supply of rental accommodation at a time when demand has increased from a fall in household size and the total population has increased with a large number of permanent migrants.