Solid Rentals in a Down Market

In search of a recession-proof property investment? Experts say the high demand for student accommodation this year will allow it to weather the property downturn better than residential property. And this should mean investors will enjoy higher rentals than other buy-to-let opportunities.

According to Aengus Lifestyle Properties CEO Richard Rubin, some 22 000 more learners passed Matric in 2008 compared to previous years. The increase has put pressure on universities and other institutions to find accommodation for the rising numbers. But, says Berry Everitt of Chas Everitt International, universities are struggling to build additional residences – meaning that students are now looking to the private sector for housing.

Everitt likes properties situated close to campuses in Pretoria, Johannesburg and Witwatersrand. Potchefstroom is also starting to show potential, while student numbers in Pietermaritzburg are also set to grow. Rubin says the University of Johannesburg and Wits University, in particular, are struggling to house new students, with demand in central Johannesburg far outstripping supply. “There’s about a ten times oversubscription for available student rooms. University residences are struggling to cope with the increased demand.” Aengus Lifestyle Properties, which offers student accommodation in the area, has seen demand for its apartments jump from 142 last year, to over 1 200 his year. The group says those numbers have also been boosted by a big influx of foreign students, as well as out-of-province students.

According to Everitt, property investors buying student accommodation will enjoy higher rent per square metre than from other residential units. Rubin says ALP’s rentals are priced between R1 500 and R2 300 a student per month. That’s in comparison to residence accommodation, which usually costs between R1 400 and R1 700 a month. And it’s also no problem to find a tenant for your property, with the institutions often compiling free property listings.

Still, students are notoriously bad when it comes to looking after the property. As a result, says Everitt, investors must select the property they wish to invest in carefully, choosing accommodation that needs little or no maintenance. “Look for robust surfaces that are easy to replace,” he says. And implement a breakage cost to be paid by tenants if something goes wrong.

As published in issue 85 of .

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