A nationwide shortage of student accommodation means the search for something suitable should start this year
Parents of matric pupils who will be studying away from home next year should already be looking for accommodation. Even though final exams might be the primary focus of most matrics and their families at the moment, putting the search off until later in the year, or the beginning of next year, is not wise, says Gumtree SA’s Estelle Nagel.
There are thousands of student accommodation offerings advertised on the platform, but many of the best will soon be gone. “Choices will be much more limited and, most likely, more expensive in December or January.”
Another challenge for matric pupils is that current varsity students know the market dynamics better and tend to get themselves “sorted out” with the best properties while first-timers are often caught unaware, Nagel says. The recommendation that students find accommodation for next year as soon as possible is critical as the demand for on-campus and off-campus lodgings throughout the country continues to far outweigh supply.
The government and private sector are attempting to close the supply-demand gap, but the task remains mammoth. More students are studying in Cape Town each year and increasing numbers are looking for accommodation in areas such as Rondebosch, Rosebank and Mowbray, says Tina Malyon, an area specialist for Lew Geffen Sotheby’s International Realty.
For a number of years the shortage has been dire. Investors are, however, always looking for bargain properties to flip and, recognising the need for student homes, have developed several apartment blocks in Main Road Rosebank/ Mowbray and in Observatory. In Grahamstown, developers “jumped on the bandwagon” years ago, so Debi Brody, manager of Chas Everitt International in the town, says there is enough student accommodation there.
“Rhodes University also regularly builds new residences.” While the need for student accommodation is one major challenge, the other is meeting this need with affordable offerings.
In Stellenbosch, there is a “huge shortage” of affordable student accommodation, says Soretha Steenkamp, principal of RealNet in the area. To address this, developers are buying homes that used to be rented to students by the room and building apartments.
“They demolish these houses and build multi-storey student flats which they rent out for about R10000 and more per student per month. However, some students can’t afford this.”
The need for more affordable student accommodation is being seen around all the tertiary education institutions in and around Cape Town. This, according to Charl Louw, principal of Chas Everitt International Northern Suburbs, is creating good opportunities for property investors in locations other than the traditional “student suburbs” of Rondebosch and Observatory.
Historically, residential properties in student towns around the world achieve a higher capital growth compared to the national average, says Louise Varga, Pam Golding Properties area manager for Stellenbosch.
“This is partly due to the impact the influx of students has on the population, which in turn fuels the sustained rental demand. Academics, lecturers and other staff involved with the university also need somewhere to live.”
Varga says students need entertainment, retail and other amenities, and this creates job opportunities for a workforce who need accommodation.
Benefits of investing in developments close to campus
Students towns are big business for the property market as the dearth of accommodation available in official university residences ensures there is always demand for apartments close to campus.
A student development in Stellenbosch presenting an appealing investment opportunity is The Niche, a 51-unit development with bachelor, one-, two- and three-bedroom units priced from R1.5million including VAT, says Pam Golding Properties.
Maryke Geldenhuys, the group’s agent for Stellenbosch, says Dennesig, where The Niche is located, is an emerging area earmarked for further development.
“The Niche offers an opportunity to invest in an area that looks set to be a hub for students and young professionals within the next five years.” In the northern suburbs of Cape Town, investors are again buying units in the apartment blocks at the Tyger Waterfront in Bellville, says Chas Everitt International’s Charl Louw.
“This is a secure development close to the Stellenbosch University business school, the University of the Western Cape and Tygerberg academic hospital. It is within walking distance of the Tyger Valley Mall and Willowbridge Lifestyle Centre.”
In addition to student accommodation investment potential in Woodstock’s 1 On Albert, Dogon Group Properties’ Rob Stefanutto says Castle Rock in Zonnebloem offers similar benefits. There, prices begin at R1.495m, including VAT and with no transfer duty.
“Foreshore Place is another example of an inner-city development offering affordable units suited for student accommodation. Prices range from R1.164m for the studio apartments.”
Stefanutto says these developments are close to tertiary institutions and offer access to public transport; security; luxurious finishes; state-of-theart perks, such as fibre connectivity; communal living spaces; laundromats; restaurants and more.
Byron Kruger, sales agent for Dogon, adds: “Once your child has graduated, you have a sellable asset that promises a tidy profit. Or you can keep the apartment and rent it out to other students.”
What students are paying
For R4500 per month, students can rent a small, shared student room, with communal bathroom and kitchen in a private residence in Cape Town. This, says Rob Stefanutto, who heads developments for Dogon Group Properties, is an entry-level price.
For R7500 per month, one can rent a small student/ bachelor pad with a kitchenette. “Some of the more upmarket private and secure residences in safe locations ask for upwards of R7500 for a shared room, going up to R10750 per month for a private room.”
In Observatory, where the big Victorian homes are “perfect” for shared student accommodation, rooms are being rented for at least R5000 per month, says Lew Geffen Sotheby’s International Realty’s Tina Malyon.
Students have access to a kitchen, lounge, two bathrooms, security and secure parking. In the suburb, properties offering four or more bedrooms are especially in demand by investors at the moment as the returns “will be good”.
Sought-after areas for students are Upper Rosebank and Upper Mowbray, which are close to UCT, Malyon says. In Stellenbosch, students look for accommodation as close to the campus as possible and prefer fully furnished units in the R3500 to R5000 per month range, which RealNet’s Soretha Steenkamp says are “hard to come by”.
“Students are under pressure in terms of finances. They will rather share a room than pay for privacy, a new trend we have seen only in the past 18 months.” Debi Brody of Chas Everitt International says properties close to Rhodes University are in demand and accommodation in the CBD is also popular.
Most of the student blocks offer two-bedroom units which, for investors, are priced on average at about R750000. They will, however, possibly sell for “as low as R680000”. “Two years ago this type of unit was selling for R850000 and higher.”
Do research first: Tips and advice
Students and their parents who are searching for 2020 accommodation should do proper research and should also follow this checklist, says Gumtree SA’s Estelle Nagel.
Get advice from those already in the market and find out the traps to avoid.
- Get a good idea of rental prices in the areas around your institution.
- If you have a vehicle, is secure parking an issue? If not, is your accommodation close to public transport or within walking distance of the institution? Factor in the travel costs.
- Find out if there are any additional expenses, such as security, wi-fi, electricity or cleaning services.
- Decide whether you want to live alone, with many people in your digs or with a small group of house mates – each has pros and cons.
- It is best to be in accommodation specifically marketed for students because the landlord will be attuned to the lifestyle and the issues that generally arise with them.
- Parents should keep perspective and not apply exaggerated standards to accommodation, which could see them paying for a more expensive property.
- Get connected on social media groups and online platforms to learn about rooms for rent and sign up for alerts for new rental listings.
Owning is best: Good returns
Parents who have the means to buy flats often weigh up this option against that of renting accommodation for their children. In doing so, they should consider accommodation for a student enrolled for a three-year degree could cost about R387 000, says Dogon Group Properties’ Rob Stefanutto.
For post-grad students, this could rise to R774 000 over a six-year period, not budgeting for rent increases. “This is money spent without possibility of return.”
Purchasing an apartment in one of the “affordable and desirable” developments in Cape Town CBD is a better investment, and for not much more capital outlay, he says.
Using the micro-living development 1 Albert Road as an example Stefanutto, says entry-level 21m² studios sell for R985 200 including VAT and transfer. “This would equate to a bond instalment of about R8 556 per month, if you were to put down a 10% deposit.”