Should You Buy a Studio or Student Apartment in Melbourne

Melbourne studio and purpose-built student accommodation (PBSA) apartments can offer lower entry prices than larger apartments, but they often come with financing, resale, and ongoing ownership cost challenges that require careful evaluation before purchase. Many lenders apply minimum apartment size requirements (commonly around 45–50 square metres, excluding balconies and car spaces) and may limit borrowing on smaller studios due to resale liquidity concerns (Australian Financial Review reporting on lender size rules; see also APRA materials referencing lender crackdowns on sub-40m² units in practice (APRA)). Owners should also factor in ongoing owners corporation fees and the risk of special levies (Consumer Affairs Victoria: owners corporation fees; special fees powers). Strategic purchases near universities and major transport, with standard residential titles/strata structures and larger internal areas, generally improve financing access and resale prospects.

Financing Restrictions and Lender Policies

Size-based lending limits: Many lenders impose restrictions on smaller apartments and studios, often treating very small internal areas as higher risk because they can be harder to resell (lender minimum size commonly cited as ~45–50m²). Some lenders may still consider smaller studios, but may cap borrowing (lower maximum LVR) or require stronger deposits depending on the property and buyer profile.

PBSA building restrictions: Purpose-built student accommodation designed primarily for student tenants can raise additional lender concerns (tenant turnover, management arrangements, and how the building is structured/operated). Planning frameworks in Victoria distinguish “student housing” as accommodation built (or converted at scale) for bona fide students (Melbourne Planning Scheme – student housing references; Melbourne City student housing policy (Amendment C163 attachment)).

Deposit and LVR considerations: Where lenders treat a property as higher risk, they may restrict the loan-to-value ratio (LVR). As a general principle, borrowing above 80% LVR often triggers lenders mortgage insurance (LMI) (ASIC MoneySmart: LMI definition; NAB explainer on LVR and LMI).

Resale Liquidity and Value Retention

Smaller buyer pool: Studios and student-targeted apartments can have a narrower resale market than standard one-bedroom apartments because some buyers are constrained by lender policies and preferences for larger layouts (see lender size commentary (The Australian Financial Review)). That can reduce competitive tension at resale, especially if many comparable studios are listed at once.

Buyer composition: These properties may attract more cash buyers and investors comfortable with tighter lending conditions, rather than a broad owner-occupier market—particularly when internal floor area is small or when the building functions primarily as student housing under planning/management settings (Victorian student housing policy context: Melbourne City student housing policy (Amendment C163 attachment)).

Owners Corporation Cost Structures

Fee proportions: Owners corporation fees can feel proportionally heavier on studios because many building costs (insurance, administration, common property maintenance) exist regardless of lot size (Consumer Affairs Victoria: annual fees).

Amenity cost loading: Buildings with extensive shared amenities (e.g., gyms, study rooms, concierge-style services) can carry higher ongoing common costs, which are then recovered via owners corporation fees (what fees typically cover).

Special levy risk: If a building faces unexpected costs or major works beyond ordinary budgets, owners corporations can raise special fees (special levies) (Consumer Affairs Victoria: power to levy special fees). This can be more painful for lower-value lots because a fixed levy amount represents a larger percentage of the property’s value.

Strategic Location Selection

University proximity: Studios close to major universities can have strong tenant demand from students, but outcomes still depend on supply in the immediate precinct. Planning and council materials commonly recognise that students prefer to live close to their institution, creating localised demand pressures (Monash City Council report noting preference for proximity). For reference institutions: The University of Melbourne, RMIT University, Monash University.

Transport accessibility: Studios near major train stations or high-frequency tram routes tend to appeal to young professionals prioritising commute time and amenity over space.

Amenity balance: Proximity to supermarkets, services, and year-round activity helps reduce the risk of term-time dependence (where demand softens outside university calendars).

Utilities-Included Rental Models

Some student-focused buildings operate with building-level service arrangements (e.g., certain utilities bundled through building management rather than separately metered), which can change the owner’s cost profile and how attractive the property is to tenants and future buyers. Where costs are recovered through owners corporation budgets, fee movements matter more to owner returns (owners corporation fees cover ongoing costs like maintenance and insurance).

Separate metering preference: Properties with standard, individually metered utilities tend to align more closely with typical residential apartment expectations, which can help resale appeal.

Who Should Consider Studio/PBSA Purchase

Cash-buffered, yield-focused investors: Buyers with larger deposits and cash buffers who can tolerate tighter lender policies and potentially longer resale timelines.

First home buyers with caution: Singles planning a multi-year hold and prioritising buildings with standard residential strata and stronger lender acceptance (often helped by larger internal areas). Understanding LVR and LMI dynamics is important when deposit size is tight (ASIC MoneySmart: LMI; NAB: LVR).

International buyers: Purchasers less reliant on Australian mortgage policy constraints may find studios attractive, but should still assess owners corporation costs and resale depth.

Who Should Avoid These Purchases

Highly leveraged buyers requiring an easy exit: If your plan depends on maximum borrowing and a fast resale option, tighter lender rules around small apartments can be a major risk (lender size commentary (The Australian Financial Review)).

First home buyers prioritising rapid equity: Limited buyer pools can restrict upside in some studio-heavy buildings, particularly where lender policies narrow demand.

Risk-averse buyers: If you’re uncomfortable with owners corporation fee variability and special levy risk, standard one-bedroom apartments with broader appeal may be a safer fit (Consumer Affairs Victoria: fees; special fees).

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