Demand for student accommodation spikes in South Africa
As the student population increases, demand also rises for student housing which so far is experiencing a critical shortage, creating excellent investment opportunities in South Africa.
Universities throughout the country are faced with an ever-increasing problem as their students struggle to find suitable accommodation and many institutions have now reached student accommodation crisis levels.
Students come from all over the country to attend universities in the main centres and in Gauteng in particular, students are faced with a chronic shortage of safe, secure and affordable accommodation.
Academic institutions have identified the problem as being one of great concern. Appeals for assistance to the Department of Higher Education, citing the effect of inappropriate or no accommodation near educational institutions on academic performance, resulted in various research projects that clearly indicated that many students are forced to live in appalling conditions. They are often far away from their universities, whilst many others tolerate unsafe, overcrowded, unhygienic accommodation which is not conducive to studying.
In addition, it was clear that there was a fair amount of exploitation taking place where students were over-charged for living in bad or slum conditions with corrupt landlords taking their rentals, then disappearing, leaving students without basic amenities. Disadvantaged students in particular are finding that monthly rental costs are using up the bulk of their monthly budgets.
In 2009, the Department of Higher Education confirmed that the shortage was chronic and that the lack of supply of student housing was one of the primary causes for poor performance and the high dropout rates at some universities.
Despite the increased allocations towards upgrading and new residences at some universities, rising maintenance costs, ageing residences and other problems have limited the growth options for on campus student housing. Many universities simply do not have sufficient space. Some universities have resorted to outsourcing their accommodation needs to private developers and building managers.
With university budgets facing major constraints and cutbacks from national government, many have prioritised academic and teaching facilities ahead of upgrading or building new university residences.
According to statistics from the Department of Higher Education, out of a student population of 530 000, there is currently only enough student accommodation for 100 000 students – this barely meets 18 percent of the demand.
Thus, as the demand for student accommodation far outweighs the supply, there are excellent investment opportunities available in this market. Although the buy-to-let market is currently depressed, student accommodation is one section of this market that is proving to be an excellent buy-to-let option, usually for a relatively small capital outlay.
A number of visionary property developers are rejuvenating city centres across the country by turning old office blocks into modern one-bedroom or studio apartments for rental to university students. Buildings are within walking distance of the universities and are safe, clean, well controlled in terms of management, noise and respect for property, and they provide excellent accommodation for students at a reasonable price. On average, in the Braamfontein area, a small studio or one-bedroom flat costs a rental of just R2 500 per month.
Private investors are also buying properties near the universities, particularly near UJ, Wits and Tukkies. They are buying these either for their own children while they study at university or to let to other students. Parents who buy to accommodate their children during their studies have found that appreciation is excellent, often selling the properties at almost double the price they paid for them (dependent on the number of years they owned the property).
Many students prefer to reside off-campus or in sectional title units with more privacy than the residences. In recent years, astute parents have realized that rather than merely paying rent for their children’s accommodation, they can invest in an asset that can yield good rental returns given the current ongoing demand.
Braamfontein, near Johannesburg’s inner city, is rapidly emerging as a vibrant growth node and is experiencing an overall surge in the demand for property. This trend towards revitalisation comes on the back of demand and supply of student accommodation. It has been and is still being driven by the enormous ongoing demand for accommodation from students attending Wits University and the University of Johannesburg as well as other educational institutions in the area such as Damelin and Lyceum College.
“The demand for properties suitable for student accommodation in the nearby Westdene, Melville and Auckland Park areas is also high, with particular emphasis on the Sectional Title sector. Properties purchased which are suitable for this kind of usage are showing a higher than average return on investment plus higher capital returns for the investor,” says Pat Evans sales manager at Seeff Randburg.
Although the rate of new development has slowed dramatically in most parts of the country on the back of the economic downturn, Hatfield in Pretoria remains relatively busy in terms of residential and corporate property activity. This has been partially driven by the ceaseless demand for student accommodation and partly by the area’s popularity as amongst international embassies and trade missions. Hatfield's growth has also been boosted by its proximity to a Gautrain station. Here too, a trend has developed whereby old buildings are being demolished or renovated and replaced with blocks of flats or offices. The buy-to-let to student apartments are proving to be excellent investments.
Due to the rapid expansion of the University of Pretoria and the acute shortage of vacant land for student housing development in the Hatfield precinct there has been of late, a marked increase in the demand for student accommodation near or around the University,” says Pieter Bezuidenhout, property consultant, Seeff Pretoria East.
“With most of the old houses in the Arcadia and Hatfield already converted into student communes and with the present new developments targeting student rental accommodation only coming onto stream later in the year or next year the shortage for student accommodation has become dire. The situation has been further aggravated by the fact that the development of Hatfield as Pretoria’s new CBD and the opening of the Hatfield Gautrain station have led to young professionals competing with the students for sectional title units either to rent or to purchase. As a result, residential property prices and rentals in Hatfield remain high and will do so in the future, if compared to the rest of Pretoria. As a result both purchase and rental prices in the Hatfield area are predicted to increase even further in future.”