International Students and Melbourne’s Apartment Market

October 2019

Victoria’s International educational sector has been a major success story for the state’s economy through not only generating export income but also by stimulating apartment construction that has been a key driver of the state’s economic growth.  Although the sector may continue to grow strongly, an emerging shift in the composition of international students may influence the scale and location of future apartment development in Melbourne.

Net overseas migration currently represents 62% of Victoria’s annual population growth with international students accounting for 46% of this.  With the net migration of international students reaching almost 40,000 in 2018 this group now accounts for 28% of Victoria’s annual population growth.  By comparison, the net overseas migration of temporary and permanent skilled workers accounted for an additional 15,690 residents or 11% of the state’s population growth. 

Annual Change in Victoria’s Higher Education International Student Enrolments by Nationality

Source: ABS

Census data highlights the influence of international tertiary students upon housing demand and the pattern of residential development at a local level.  Within central Melbourne (postcode 3000) the population of international university students alone increased more than three fold over 2006- 2016 to 9,670, representing 22% of this postcode’s total population growth.  Similarly within the postcodes of 3051 (North Melbourne) and 3053 (Carlton), international students accounted for 22% and 50% of population growth respectively over the decade. 

A number of suburban locations have also experienced strong population growth largely as a result of international students including the postcodes of 3083 (Bundoora), 3125 (Burwood), 3145 (Caulfield East) and 3168 (Clayton).  The combined population of international tertiary students in these four postcodes increased by 6,200 over 2006-2016, representing 35% of total population growth.  International students have therefore not only provided a considerable impetus for the Victorian economy but also residential development in a number of locations. 

International student enrolments in Victoria’s higher education sector have grown by an average of 14% per annum since 2013 compared to 8% per annum over 2002-2010.  Chinese students currently account for 35% of enrolments followed by Indian students representing a further 26%.  While annual growth in the number of Chinese students has declined by 40% since 2016 this has been more than offset by a tripling in enrolments of Indian students as shown in the figure below.  This shift in the source of international students reflects a number factors including:

  • Universities actively developing new markets for international students.
  • The impact of a sharp decline in the Chinese birth rate over 1990-2000 from 21 births to 14 births per 1,000 people.
  • India’s per capita economic growth rate continuing to strengthen while China’s growth rate has softened.

Annual Change in Victoria’s Higher Education International Student Enrolments by Nationality

Source: Commonwealth Department of Education (International Student Data)

With India now overtaking China as the fastest growing source of international tertiary students it is crucial to understand what this may potentially mean for housing demand given the very different housing preferences of each group. 

Growth in demand for housing by international tertiary students in Melbourne has been primarily met by high rise apartments, defined as being of four or more storeys, which accommodated 43% of increased demand over 2006-2016, followed by detached houses (34%) and townhouses / low rise apartments (23%).  By 2016 the proportion of international students living in high rise apartments was 35% compared to only 24% a decade earlier.  As a proportion of high rise apartment residents, international students accounted for 11.7% of residents in 2016, and 14% of the growth in residents over 2006-2016. 

Metropolitan Melbourne – Private Housing Occupied by International Students

Source: ABS Census
Source: ABS Census

Strong growth in the number of Chinese students at Melbourne’s tertiary institutions has been a key driver of demand for apartments with 44% of this group living in high rise apartments in 2016, compared to only 8.2% of Indian students and 29% of other international tertiary students. 

The residential locations chosen by Chinese students are also concentrated in five municipalities which together accounted for 78% of this group in 2016, with the City of Melbourne accounting for 40% followed by Monash with a further 18%.  Indian students however are more widely distributed across Melbourne with the top five municipalities only accounting for 39% of students, and only 8.3% living within the City of Melbourne. 

International Students Chosen Housing Type by Nationality

Source: ABS Census

Economic factors influence the choice of location and type of housing occupied by international students with:

  • Chinese students more likely to be supported by their parents with only 79% not having some form of employment compared only 22% of Indian students that are not in the workforce.
  • Weekly rent paid by Chinese students being noticeably more than that paid by Indian students as shown in the figure below.

Weekly Rent Paid by International Students 2016

Source: ABS Census

Given the notably different socio-economic profile and housing preferences of Chinese and Indian students, the future composition of international students may potentially impact upon demand for apartments in central Melbourne as well as areas near suburban university campuses.  Predicting the future size and composition of Melbourne’s international student population is however complicated by a range of factors including:

  • Increasing uncertainty surrounding the global economy which may potentially limit growth in international student numbers.
  • A greater reliance of Indian students upon local employment to finance their studies.
  • The potential for Australia to attract an increased share of Chinese international students from the United States given the current trade war between the two countries.
  • The impact of demographic changes upon the number of potential Chinese international students.
  • The perceived value of an overseas education by Chinese residents, combined with Chinese universities improving their international ranking.

Continued strong growth in the number of Indian international students is unlikely to provide the same impetus for residential apartment development as Chinese students did over the past decade.  This is likely to create a greater level of uncertainty around the likely future demand for apartments by international students and reinforce the existing trend by developers towards smaller scale apartment projects aimed at local owner occupiers as well as commercial office projects.  Over the medium term, some municipalities may need to monitor the influence of a changing mix of international students upon housing demand.