In recent years, there has been a significant increase in purpose-built student accommodation in South Africa, yet we are still behind the curve in terms of supply versus demand, compared to developed countries. This is good news for investors wanting to get into what is deemed to be a highly profitable property sector.
Every year as September nears, thousands of students start seeking accommodation near their university of choice. There are a number of factors that determine what is considered good student accommodation. Location and cost are the biggest factors. The closer to campus, the better and if the apartment is fully furnished, better still. WIFI is also an attractive feature and so is good security.
Dustan Folkus, Sales Project Manager at Engel & Völkers Developer Driven Projects explains that for investors the purchase of student accommodation offers an excellent return on investment. “Annual occupancy is usually at over 97% and both rental value and retail value increase with the passing of each year. In other words, the profit margin increases annually. For investors wanting to generate passive income and for parents looking at the option to buy an apartment for their child, as opposed to them renting for at least three years, well located, well-maintained student property is a solid investment,” explains Folkus.
Unilofts launched in Bloemfontein
Engel & Völkers Developer Driven Projects has launched the sales of Unilofts in Bloemfontein, designed especially with the university student in mind. The Unilofts are strategically located across the road from the University of the Free State, within easy walking distance to all campus facilities. Each of the 190 units is fully furnished and equipped with all the necessary appliances to make student life as easy as possible. Security features include controlled fingerprint access, 24-hour security with emergency response, CCTV and roaming guards. Each bedroom has a study area made up of a desk and chair, the development has a communal braai area, vending machines and a copy shop. There is also a housekeeping service.
“Students are surprisingly meticulous when it comes to their accommodation. The unit needs to be close to campus, close to food outlets and entertainment spots, clean, well furnished with a decent-sized kitchen. There is also a demand for pet-friendly accommodation,” continues Folkus.
Increasing demand for purpose-built student accommodation
The South African market is far from mature in terms of supply and demand with regards to good purpose-built student accommodation. Coupled to the Government’s National Development Plan of increasing tertiary student enrollments to 1,600 000 by the year 2030, there will be a significant increase in the demand for student accommodation during the next decade. One of the key benefits of investing in this type of property is the consistently high occupancy rate.
For the investor, consistent rental income is a priority. With South Africa’s continuing rapid urbanization, expanding middle-class as well as the fact that the country offers some of the most sought-after universities on the continent attracting many foreign students, steady rental income from student tenants is almost a guarantee.
“In terms of the value opportunity, South Africa as an emerging economy in addition to the brisk increase in tertiary education students, the prospect for investors is lucrative. In fact, student accommodation in a high demand, low supply environment is a golden egg,” continues Folkus.
Investment opportunities in Potchefstroom
According to Helandi Moolman of Engel & Völkers Potchefstroom, there has been a huge boom in student accommodation in the area since 2012. “A lot more student accommodation is being built and the focus now is on location and price. As in other university cities and towns, students look for fully furnished units that are as cheap as possible and as close to campus as possible,” she says.
One of the most important factors in ensuring the longevity of good returns is vetting tenants properly and keeping occupancy levels high. The rental division at Engel & Völkers, specialises in the letting of student accommodation and each prospective tenant is thoroughly checked. “The last thing a landlord wants is a bad tenant, so we prequalify and place tenants on their behalf. We also lease the units year on year so there is no wastage,” explains Moolman.
Off-campus student accommodation is a growing sector in South Africa and proving to be a profitable choice for investors. However, it is important to have an understanding of what type of accommodation students prefer. It is always a good idea to discuss opportunities with a reputable real estate company, such as Engel & Völkers, that specializes in this sector.