WORDS: DEBBIE HATHWAY IMAGES: BONZAI PHOTOGRAPHY & SUPPLIED
What do teenagers need? Education,” writes Savvas Savouri, chief economist at London-based Toscafund in the 2019 edition of the Knight Frank Wealth Report, which looks at how private wealth is shaping property markets globally. “It’s almost as if they can’t build the student accommodation quickly enough in the UK.”
The report states that “property investors will become increasingly focussed on income, asset management and development opportunities”, with investors increasing their exposure to education facilities and student housing.
“While the South African market lags about three to five years behind global trends in student accommodation, there are opportunities for investors, developers and property managers,” says Johan Janse van Vuuren, property development manager, Eris Property Group.
Based on the Department of Higher Education and Training’s shortfall estimate of about 250,000 beds, Eris Property Group highlights that student accommodation will need to scale rapidly to meet government’s intended increase of tertiary enrolments to 1,5 million students by 2030.
Emily Craig, owner and CEO of Cape Town-based Student at Home, which has 326 units, believes there will never be enough student accommodation around. While more developers are jumping on the bandwagon, some even cutting their teeth in the sector, she says she has been “in this game for a long time” and attributes her success to creating the right environment. “It’s one thing giving students the necessary facilities, which encompass everything from a safe and secure environment to a home away from home, but it’s another to manage them,” says Craig.
Student at Home clients must stick to certain rules and regulations or risk losing their deposit. “As much as kids want to have freedom, parents are happy to know there’s a certain amount of structure they have to abide by,” she adds.
Swish Property Group is a property development and management company with rental capacity for more than 700 beds in Wynberg and Observatory, Cape Town. Housed under the banner My Domain Student Living, students have everything they need at their doorstep.
“We build and rent student-centred residences that are focussed on students’ wellbeing, offering peace of mind for parents and creating the best environment to facilitate success and ease of transition through the education cycle,” says Craig Getz, director: marketing and residential sales.
My Domain is a safe, secure turnkey product with biometric access control. Residents get the benefit of Wi-Fi, a shuttle service to universities, a gym with personal trainers, and student liaison representatives on site. “Yield fluctuates based on the market. It’s not as straightforward as a block of flats where you’re getting a specific yield of 8% or 9%,” Getz says.
Buy or rent?
Parents who believe it’s better to buy than to rent property invest on behalf of their children at tertiary education level, because student residences are often full and rental fees can amount to the same as a bond repayment.
Rob Stefanutto, head of developments, Dogon Group Properties, says in Cape Town about R4,500 per month would get you a small shared student room with a communal bathroom and kitchen; and you could rent a small student or bachelor pad with a kitchenette for R7,500. “Some of the more upmarket private residences in safe locations ask more than R7,500 for a shared room, going up to R10,750 for a private room.
If a child enrols for a three-year degree, parents would be in the hole for R387,000 for accommodation. This is money spent without the possibility of return,” he says. “Now consider the cost of purchasing an apartment. Entry-level 21m2 studios are selling for R985,200, including VAT and transfer, at 1 Albert Road in Woodstock. That would equate to a bond instalment of approximately R8,556 per month if you were to put down a 10% deposit.”
Accommodation close to higher-learning institutions can attract more income per square metre and guarantees year-on-year tenants. Balwin’s The Huntsman in Somerset West ticks those boxes for students enrolled at Stellenbosch University, for example. Besides quality apartments with eco-friendly appliances, cutting-edge security, and Wi-Fi, The Huntsman has the added advantage of being close to shopping centres and beach watersports, among others. Unit prices start from R849,900.
“There’s a boom in developments in Stellenbosch offering accommodation ideally suited to students,” says Louise Varga, Pam Golding Properties area manager: Stellenbosch, Somerset West and Gordon’s Bay. “Common features include excellent location, proximity to campus, security, off-street and secure parking – a necessity in a town where parking is at a premium – and luxury or contemporary finishes in the apartments.”
The Niche in Stellenbosch is a 51- unit development with bachelor apartments starting at R1,5m. “Given the demand for rental accommodation, this offers excellent return on investment,” Varga says.
Apartments at Bosmans Club in Bosman’s Crossing on the outskirts of Stellenbosch, start from R1,4m and are ideal for older students who don’t need to live in the centre of town. The Den, on the other hand, comprises 60 studio apartments minutes from campus. Only four units are still for sale. The developers have applied meticulous attention to detail, including security features, contributing to a conservative estimate of 25% capital growth already, and a high rental occupancy rate. Plans for Phase 2 are under way.
Student accommodation group Stag African has funded and developed four residences at Stellenbosch University with 600 beds on a 20-year lease. The returns are relatively modest at about 7% (after interest charged), but the investment is supported by a strong balance sheet on the part of the university. “Adequate housing where students have social support and feel safe is crucial,” says Stag founder John Schooling. “It’s about more than providing a place to sleep. It’s about creating communities and a listening, learning and living environment.”
As part of a R540m development at Fort Hare University in Alice in the Eastern Cape, funded by the Department of Higher Education and Training (DHET), the Development Bank of Southern Africa (DBSA) and the European Union (EU), Stag African will hand over 2,047 beds in two phases. The first 737 beds have been occupied already and the project is set to complete in October next year. “This is the single largest student housing development ever undertaken by any of the 26 public universities in South Africa,” says DHET director-general Gwebs Qonde.
Students looking for affordable accommodation will love the location of iQ Brooklyn, just 800m from the main campus of the University of Pretoria (Tuks). Priced from R995,000 for a studio, including transfer costs, iQ Brooklyn provides meeting rooms, a cafeteria offering home-cooked meals, excellent security, fast internet, a pool with a sun deck, and laundry and cleaning services. It consists of five blocks of studio, one-bedroom and two-bedroom units, each with secure undercover parking.
“An added advantage is that investors buying into this development can diversify and target the diplomatic contingencies in the nearby areas by offering short-term accommodation for foreign-office visitors,” says Ilma Brink, regional development sales and commercial property manager, Pam Golding Properties Pretoria. “Because short-term rentals are allowed, the yields can be as high as 15%. In the long term, we have determined affordable levies, rates and taxes, as well as a net return on investment from a disposable income perspective of 7.5%.”
Those who get it right will have an above-average offering that goes beyond facilities. With locations at campuses in Bloemfontein, Port Elizabeth, Cape Town, Stellenbosch, Potchefstroom and Tshwane, CampusKey Student Living is one of them. This national offering is about providing inspirational and vibrant environments and encouraging collaborative coexistence so that, with appropriate commitment to their studies, students can set off on the road to success.
Adequate housing where students have social support and feel safe is crucial. It’s about more than providing a place to sleep. It’s about creating communities and a listening, learning and living environment. JOHN SCHOOLING, FOUNDER, STAG AFRICAN