Student accommodation has become one of the most recession-proof, interest rate-proof and resilient property investments in South Africa.
This is particularly true in Johannesburg, where tertiary education institutions proliferate and the income stream from these investments is as proverbially certain as death and taxes, says High Street Auctions director Greg Dart.
The International Finance Corporation has projected a national shortfall of close to 800 000 beds by 2025, and with the National Student Financial Aid Scheme (NSFAS) in play from the Department of Higher Education and Training, rental payments are guaranteed by the government for bursary recipients living in registered residences.
“The rates aren’t paltry either; according to the NSFAS website, monthly accommodation rental allowances for university students living off campus will match whatever on-campus residence fees are charged by their tertiary institutions.”
Dart says while many student accommodation landlords opt for NSFAS-aligned fees, the scope is actually a lot bigger.
“The drastic overall shortage of beds combined with feature-driven demand means the income potential is wide open for developers, in particular.
“Standard student accommodation choices in Johannesburg are anywhere from six-bed dormitories to single rooms that range in price from R2 000 to R7 000 a month, but these usually come with communal bathrooms, kitchens and living areas.”
If a developer can find a building with conversion potential in proximity to a large tertiary institution, he says “the sky is the limit”, particularly when – for instance – a number of cleverly-designed micro-apartments are factored into the renovation.
“In Johannesburg, micro-apartments are prime student residences, and since they usually feature private ablutions, basic cooking facilities and multi-purpose spatial functionality, they command a premium in the private market.
“Monthly rentals for these mini studios can easily exceed R10 000.”
Dart explains that this market segment is driven by students’ desires for the same levels of privacy they enjoyed while living at home, especially when it comes to bathrooms. Parents also want to know that their student children have 24/7 security, uncapped WiFi, reliable transport links to and from university, and that they’re surrounded and supported by an education-focused, like-minded peer group.”
There’s historically been a “massive gap” in student accommodation requirements, says Grant Smee, managing director of Only Realty Group. He 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.
“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.
“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.”
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.”
Where must these homes be?
Procter says student accommodation needs to be as close as possible to the campuses their students attend, 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 students 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 and hybrid learning. With the rise of load shedding once again I would also urge developers to consider generators, UPSs, or inverters 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.