The ongoing student-housing shortage in the Western Cape – indeed in the whole of SA – provides a potentially lucrative opportunity for buy-to-let investors.
A 2015 survey conducted by The Times of nine South African universities found that, for the 140 000 residence applications last year, there were only 68 419 available spaces. And a survey by the Department of Education of the 50 public technical and vocational education and training colleges in the country, also conducted last year, revealed that for the 710 000 students in these institutions there were only 10 120 residence beds available – or only 1 bed per 70 students.
When one considers these staggering numbers, together with the fact that there are over 1m students registered at private and public universities in SA, the opportunities for property investors in this sector seem endless.
Indeed, in Stellenbosch, where annual capital growth is firmly around 10%, student housing is a vibrant and busy market, says Elmarie van Huyssteen, principal of Chas Everitt International in the university town.
“With investors accounting for 70% of all purchases, parents are considerably outnumbered,” she says. “Demand is greatest for sectional-title units, but there is a big price discrepancy between those located on campus and those further away. For example, you’ll pay around R900 000 for a two-bedroom apartment within a 4km radius of campus, while the same property on campus will cost you around R2,8m.”
Parents (especially those of female students) are also prepared to pay a premium for the 70sqm two-bedroom apartments in Stellenbosch’s ‘Green Route’ area, which is a comfortable walking distance from the university and patrolled by security guards, says Sonja Thielen, campus accommodation specialist at Chas Everitt International. Prices for these properties range from R20 000 to R30 000/sqm.
From an investment point of view, however, it makes sense to buy off campus, says Van Huyssteen. “The monthly rental on a two-bedroom apartment on the outskirts of town is around R7500 (with levies and taxes adding another R1600), while, mid-campus, a similar unit will fetch between R8000 and R12 000 – so not much difference in terms of percentage gross annual yield.”
Meanwhile, in the suburbs surrounding the University of Cape Town, which is only able to accommodate 30% of its first-year students in residence, demand also significantly outstrips supply, says Lisa Rowell, sectional-title specialist at Chas Everitt International in Claremont. “Rondebosch and Rosebank, which are closest to campus, are obviously most popular, but, since the inception of the Jammie shuttle student transport service, the areas of choice have extended all the way through Mowbray, Newlands and Claremont.
“That said, all of these suburbs are severely oversubscribed and purchase prices have increased exponentially,” she notes. “Units in new developments in Rondebosch, Newlands and Claremont are fetching up to R60 000/sqm. Better value for money is to be found in next-tier suburbs such as Harfield Village and Kenilworth, where prices are still less than R20 000/sqm.”
While the province’s largest university, Cape Peninsula University of Technology (CPUT), has campuses spread over various locations, the Bellville campus, which is the university’s administration hub, draws many students to the Northern Suburbs, says Charl Louw, co-principal of the Chas Everitt International franchise for the Northern Suburbs of Cape Town. “The same is true for Northlink College, which has campuses in Bellville and Parow, as well as the University of Stellenbosch’s Business School, also in Bellville, and its Medical School training facility at Tygerberg Hospital,” he adds.
According to Louw, two-bedroom apartments in Bellville (priced at around R550 000) and Parow (approximately R400 000) are very popular, and in Boston a small house can still be found for R1,2m. “Students are also attracted to anything for rent close to public transport on Voortrekker Road, where some developers have repurposed office buildings as student accommodation.
“Increasingly, investors are also buying older homes in more affluent areas, such as Durbanville, and, after some restructuring, renting them out to students on a room-by-room basis,” he says. “While they may pay regular market price for these properties, monthly rents of around R3000 per room mean that they are able to significantly enhance their yield in the long run.”
In Summary: Why student housing scores top marks from investors?
1. Due to the the massive student housing shortage where demand outstrips supply, this is a very vibrant market.
2. Investors account for 70% of all purchases.
3. Student housing opportunities off-campus are a good investment.
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