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Student rentals in Stellenbosch are still lucrative

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Property investors are advised to carefully investigate specific suburbs in the Western Cape before buying to ensure the best returns possible.

The Western Cape might still be the province with the highest median property price but this median has dropped by 3% from Q4 2018 to Q4 2019, suggesting not all suburbs will perform as well as others, says Adrian Goslett, regional director and chief of Re/Max of Southern Africa.

The historic town of Stellenbosch, however, continues to be a “healthy market” that gets better each year, notes Stiaan Vercuiel of Re/Max Helderberg.

“We are seeing high demand in the student housing sector in terms of rental demands, with an average growth of 8.4% in rental returns per annum. In terms of annual growth in property value, the market indicates a moderate 13% growth.”

Bird Street, in particular, has experienced exponential growth since the latest property developments in the street were launched.

On average, Vercuiel says buyers searching for student accommodation in this area consist of around 70% for parents and local investors, with foreign investors making up the other 30%.

“The market indicates that for buyers, first prize is to purchase an investment from a developer due to the savings one can make on transfer duty costs. Tenants, on the other hand, are more concerned with what the property has to offer in terms of monthly affordability and again, like the purchaser, location plays a big factor. Safe, on-site parking is another desirable feature,” he says.

Investors should be aware that not all developments will offer the same returns though. Some developments are entry-level investments, not only because of the price, but due to the lack of extra features.

“On the other hand, higher-end ‘entry-level’ apartments, would come standard with features such as built-in air conditioning, name brand appliances and solid wood cupboards, for example.”

Vercuiel says it is also important for investors to know who is building one of their most valuable assets to ensure they are investing in a quality product that won’t end up costing them a fortune in repair work later.

In addition, he advises investors to find out what the estimated levies would be, as the monthly repayments can quickly become expensive.

Goslett adds: “Investing in student accommodation in a market with a history of good returns is always a smart decision.

“Stellenbosch holds huge potential for investors right now and I recommend buyers explore what opportunities might exist for them within this market.”

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