Many students In Cape Town are moving away from living in digs to living in their own flats. This presents a great opportunity for investors.
Cape Town has long been a centre for student life, with its numerous highly-regarded colleges and universities attracting tens of thousands of learners to the city each year. These students have traditionally lived in various forms of shared housing, from official university residences to private, rented digs. Recent trends, however, indicate this kind of community living is on the decline. Instead, students are opting for their own, private spaces, despite the higher cost this type of accommodation usually demands.
“Students these days are definitely more likely to rent a studio or one-bedroomed apartment than they are to rent a multiple-bedroomed property,” says John Birkett, co-franchisee at the Rawson Property Group’s Claremont franchise and Cape Metro Classic Rentals. “There is probably an element of parental influence in this – parents feel more in control of their children’s lifestyle in a one-person flat – but the studentsthemselves are also less inclined to share their space than ever before.”
For investors, this trend offers a wealth of opportunity, with demand for student-appropriate rentals consistently higher than supply. Yields vary depending on the age and condition of the property, but Birkett estimates a typical return of around 6%, gross. “Because of student preferences, investment studio and one-bedroomed apartments from Woodstock all the way through to Kenilworth and even Pinelands are hugely sought-after and difficult to find,” he says. “Prices vary depending on the area, but you can expect to pay around R1.2million and R1.8million for a studio and one-bedroom in a new development, respectively.”
Older apartments are more affordably priced, and can offer higher yields, but come with their own set of complications. “One of the main problems with older apartment blocks used to be the lack of off-street parking,” says Birkett, “but with services like Uber on the rise, this isn’t such an issue anymore. These days, it’s more a matter of high expectations – students aren’t satisfied with second-rate finishes and furnishings. Poorly maintained apartments or furnished rentals with shabby décor can be difficult to tenant.”
Other essential amenities for students include a good internet connection, which can replace subscriptions like DSTV thanks to the popularity of streaming entertainment providers like Netflix. Security is also important, and 24/7 access control is a big plus.
For students, high expectations come with high rentals, however, and the average apartment in a popular student area will command around R10k per month. “Apartment rentals start at about R6.5k,” says Birkett, “and go all the way up to R25k in the best developments. Finding tenants willing to pay over R12.5k can be challenging, however.”
For parents balking at this kind of rent, Birkett strongly recommends considering a purchase instead. “I’ve assisted a lot of parents in purchasing an apartment for their student child, with the intention of selling when their education is complete,” says Birkett. “I’ve never once had a parent make a loss on a property by doing this – not even after selling a mere two years down the line.”
Buying a student-friendly apartment as a parent could also be an economical way to get a foot in the competitive Cape Town property market. “By combining the expense of accommodation for your child with the expense of an investment purchase, you essentially subsidise the one with the other,” says Birkett