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Our students desperately need homes – and they need them now

The demand for student housing has never been higher than it is now. Photo: Varun Kulkarni/Pixabay

The demand for student housing has never been higher than it is now. Photo: Varun Kulkarni/Pixabay

Published May 13, 2022

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The demand for student accommodation has never been so high, and now that life is returning to some kind of normality and students are back in lecture halls, the spotlight on this property sector is back.

Real estate auctioneer Joff van Reenen, a property industry veteran and founding partner of High Street Auctions, says he has “never before” seen the need for student housing as high as it is now, nor the timing so favourable for capitalising on this demand.

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“When the World Bank Group’s International Finance Corporation (IFC) was researching the feasibility of investing R150 million in a local property company’s plan to develop accommodation hubs for an additional 16 000 student beds, it drew attention to the fact that South Africa’s student housing supply-demand gap already exceeded 500 000.

“The IFC’s report also forecast that, by 2025, the student accommodation shortage would rise to more than 780 000 beds, no doubt at least partially prompting its decision a year ago to proceed with the investment.”

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Furthermore, he says, in December, Growthpoint Properties launched an unlisted student accommodation REIT with a R2 billion seed portfolio and approval from the National Student Financial Aid Scheme (NSFAS).

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“There’s no question that student accommodation is emerging as one of the most exciting real estate investment trends in South Africa, and the availability of opportunities in this sector is increasing.”

How big is the supply-demand gap?

There’s historically been a “massive gap” in student accommodation requirements, agrees Grant Smee, managing director of Only Realty Group. He too believes that there has been an uptick in developers focusing on the student accommodation space, saying this is being seeing particularly in areas like Durbanville, Stellenbosch, and coastal areas like Gqeberha.

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“The areas most in need of more student housing are linked to the coastal universities – Stellenbosch, Makhanda, and Cape Town. With the exception of the latter, which is a big city where all demographics are facing a housing shortage, Stellenbosch and Makhanda are small towns battling to meet the demand.”

Alexandria Procter, chief executive of DigsConnect – an online marketplace that connects landlords with students looking for accommodation, also notes that “Stellenbosch has a chronic under-supply of student housing, and needs more developments urgently”. Other “good spots” for more student developments include Durban and the Northern suburbs of Cape Town.

The biggest stakeholder in the student accommodation space, she says, is NSFAS, which currently funds 800 000 students in South Africa.

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“DigsConnect is the largest repository of NSFAS-accredited properties, but NSFAS needs to urgently update their norms and standards document to reflect modern living requirements so that more suitable properties can be made available to students.”

Van Reenen says the “student accommodation crisis” at the Cape Peninsula University of Technology (CPUT), is “arguably even worse than that of University of Johannesburg”.

“Cape Town’s real estate market is extremely competitive in general, but prices rise exponentially the closer one ventures to the City Bowl and Atlantic Seaboard. CPUT’s District Six campus is located immediately adjacent to the CBD; a prime location that, for students, is a double-edged sword accommodation-wise.”

He states: “This year CPUT as a whole enrolled 33 000-plus students, more than half of whom are studying at the city campus that offers fewer than 3 000 beds in its residences.”

To eradicate the gap in available student accommodation, Smee believes there needs to be a collaboration between private sector, government, and the universities themselves to build more.

“The second big issue is that of affordability. Will students be able to afford to live in these in-demand areas? This is where government and university subsidies must step in as it’s difficult for developers to justify projects that will not be profitable. A balance must be struck.”

Procter says private landlords are investing in rental properties “all the time”, but the “trick” is where to find these beds.

“South Africa is a very economically diverse market, so it's important to have a match between the price of properties and the students that you're targeting.”

She adds: “Demand way outstripped supply on DigsConnect this year. Many of our landlords told us that if they had second buildings, they would have filled them up on DigsConnect as well! It's an exciting time to buy student properties...”

Where must these homes be?

Procter says student accommodation needs to be as close to the campus as possible, not only for access to classes and facilities, but also because the campus is the hub of the cultural life of students.

“Another option is to be on the university transport links, so that it's easy for student to get around.”

Smee echoes this, saying that accommodation must be within walking distance to universities and places of study, or in close proximity to affordable public transport as the majority of students do not have their own cars.

“Close proximity to shops, health care centres, and other day-to-day necessities is also beneficial to students who do not have the means to travel far.”

What should they offer?

In terms of interior offerings, he says students need places to study – either in their rooms or in dedicated quiet common areas, places to socialise, and amenities such as laundry rooms and good security within the building.

“High-speed internet is now a non-negotiable with the rise of remote learning and hybrid learning as they will not be able to participate in coursework without strong internet. With the rise of load shedding once again I would also urge developers to consider generators, UPSs, or invertors to allow them to continue studying when the electricity goes out.”

In addition to uncapped, super-fast WiFi, “great security and safety features”, Procter says furnished properties get filled faster than unfurnished ones.

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What prices can students afford to pay?

While rents depend greatly on the market, university, and city one is targeting, she feels that “anything in the R4 500 per student per month range generally sells fast”.

Smee says the prices range that should be catered for is “as cheap as possible”. This is to ensure accessibility to students from disadvantaged backgrounds looking for safe and convenient places to live while they learn.

“If I had to put a number to it I would say R3 000 to R5 000 a month for individual students sharing a room and R4 000 to R6 000 a month for students getting their own space.

“It’s important to remember that the students themselves generally aren’t the ones paying for their accommodation. They are either funded through grants or bursaries, or by their parents.”

The goal, therefore, he says, is to “minimise the financial stress on the guarantors” and de-risk investors by offering reasonably priced accommodation.

Opportunities

Van Reenen says that, this month alone, High Street Auctions is bringing six such prospects to market that offer investors a choice of acquiring established and fully-leased student housing, or properties with potential for extensive student accommodation-type redevelopment.

“These properties are spread across four provinces with established student accommodation investments on offer in Johannesburg, Durban, and Nelspruit, while exciting development opportunities in Cape Town and Pretoria will also be auctioned.”

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