Student accommodation holds great potential as a property investment that is virtually recession-proof.
Demand for rental units near campuses is increasing rapidly as student numbers and waiting lists for university residences grow. And the pattern is set to continue in future thanks to the country’s large percentage of young people and the increasing emphasis placed on tertiary education to plug skills shortages.
So says Berry Everitt, MD of the Chas Everitt International property group, who notes that with greater pressure on universities and colleges to train larger numbers of students, their budgets do not leave much scope to build additional student residences, with the result that they increasingly rely on the private sector to supply in the demand for student housing.
“And while there is already a strong argument to be made that bricks and mortar represent a sound long-term investment, student housing is unique in that rent per square metre is on average much higher than rentals for normal residential units.
“Secondly, finding a tenant is usually no more arduous than keeping the property listed with an agency affiliated with the institution. Many institutions compile free property listings and distribute the lists to prospective students at the end of each academic year.”
Writing in the Property Signposts newsletter, he says the key to a successful investment is to target areas close to campuses. Rents and occupancy rates rise in direct relation to the distance the property is from campus.
“Even so, some institutions have a greater need for student housing than others because their student numbers are growing faster. In Gauteng the universities of Pretoria, the Witwatersrand and Johannesburg are showing strong growth, while mining activity around Potchefstroom is expected to translate into greater residential density and thus growing applications at the local university.
“Investors may also be rewarded by keeping an eye on the University of KwaZulu-Natal in Pietermaritzburg. The city has been named as the province’s sole capital and growth is expected to swell student numbers at the local university.”
Everitt says the thought of letting students loose in your investment property may be too much for some to contemplate, but that careful selection of the property may limit annual maintenance. Elements to keep in mind in this regard include robust surfaces such as floor and wall tiles or washable paint and basic fittings that can be replaced at little cost. A breakage deposit paid by tenants should go a long way to cover the replacement cost of basic fittings damaged accidentally.
“And, speaking of maintenance, the annual summer vacation at the end of the academic year is an ideal time to attend to basics such as cleaning up and making repairs. Even students who renew their contracts for the next year – and thus pay the rent over the holiday period – are likely to spend their holidays elsewhere, giving landlords plenty of time to carry out maintenance.”
Issued by Chas Everitt International
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