With many tertiary education institutions looking to resume on-campus lectures next year, the student accommodation shortfall is back in the spotlight. Paul Stevens, CEO of Just Property, looks at the current state of play.
The South African government has stated that it aims to increase the number of students enrolled at universities and TVET colleges to 4.1 million by 2030. (The World Bank Group’s International Finance Corporation (IFC) estimates that in 2020 that number was just over 2.55 million.)
Purpose-built student accommodation (PBSA) is already in scarce supply, with 2020’s estimated supply-demand gap of approximately 511 600 beds expected to grow to around 781 000 by 2025, 84 000 of those beds are needed by NSFAS students.
According to the IFC’s Market Assessment: The Student Housing Landscape in South Africa, “The development of private accommodation has mainly driven the PBSA sector in the last decade. However, private developers have, to date, mainly been catering to the mid- (ZAR 3,000 – ZAR 4,500 per month) and high-end market (ZAR 5,000 – ZAR 8,000 per month). This has created a wide gap between affordable and mid-level student accommodation.”
The Development Bank of Southern Africa (DBSA), National Treasury and the Department of Higher Education have established the Student Housing Infrastructure Programme (SHIP), with the aim of developing 300 000 student beds over the next decade.
What if tertiary institutions adopt a hybrid mode of teaching?
JLL, appointed as lead Advisors by the DBSA SHIP Management Office (MO), note that student housing plays an integral part in facilitating the success and graduation of tertiary education students. “A lack of infrastructure such as electricity and internet connections, coupled with safety concerns, are key reasons [that students from lower-income households] prefer dedicated student accommodation premises… Not surprisingly, demand for a return to student housing reached such heights that thousands of students signed an online petition to the Department of Higher Education to allow them to return to their campus residences and accommodations. The primary reasons cited for wanting to return to their student housing includes the need for private space to study, more reliable internet connections in residences, unconducive home life, etc.”
There is a clear opportunity for developers and investors to provide the accommodation students are so desperate for.
What do the agents say?
The agents I spoke to agree that all students have the same basic requirements: safety, fast internet, large communal spaces where they can spend time together, and parking or proximity to public transport. They offered the following input as area specialists:
Riaan Theunissen-Loos is the Senior Rental Manager of a number of Western Cape branches, including Stellenbosch, where he manages student accommodation. He had this to say: “The closer the property is to the centre of the town or campus, the higher the value/purchase price would be. We rent out our clients’ properties per room, with the kitchen/bathroom being shared. The number of available rooms plays just as much of a role in the yield as the proximity to campus”.
“It’s a complicated calculation, but on average, each property rented out by Just Property Stellenbosch has about five rooms, each room leased out for around R6 000, totalling to R30 000 rental income p/m. If the property is valued at R3 000 000, the bond repayment would be around R23 000 p/m. Your bond is already fully paid for, and the only remaining costs would be your rates (average R2 000 p/m) as utilities are additional costs for the tenants. Generally speaking, any property purchased around universities is nothing less than a guaranteed fantastic investment.”
Robyn Stanford in our Gqeberha (Port Elizabeth) branch says that demand slowed during 2021 thanks to the online learning scenario, but has recently increased dramatically with many students inquiring about accommodation for next year. “The room rentals here range between R2 500 and R4 000. Shared houses range from R6 000 to R12 000 including parking and Wi-Fi etc,” she says. “Good areas for students include Humewood, Humewood extension, Summerstrand, South End, Newton Park and Central.”
“It’s likely that the North-West University will be fully opening up to students attending campus in 2022, and we have already had a surge of students and their parents enquiring about rental properties,” says Erika le Roux, franchisee of Just Property Potchefstroom. “We have found that the lower-priced sales listings tend to give a better yield in rental income and, when it comes time to sell them, tend to be more attractive to investors. Medium priced sales listings also seem to hit the spot, fetching good rental incomes in relation to the list price, but properties that are listed at the higher end of the market often struggle to get rental incomes at the same ratio.”
Arlize Wilken at our Vanderbijlpark branch says there is high demand for and low supply of bachelor flats for students in her area. “You’re looking at R1 500 for a room with a shared bathroom and kitchen, and R 2500 for a bachelor with water and electricity included,” she says.
From the above, it is clear that there are opportunities for investors and developers whether they choose to focus on the affordable to mid-level accommodation, or the mid to high-end market. The advantage of multi-let accommodation is that it is also popular with young, single professionals. If you have bad experiences with students, you could always switch to renting your property to slightly older, more responsible tenants.
LEASES FOR STUDENTS
Clina Steyn, Managing Director of SSLR Incorporated has some advice for landlords looking at signing leases with students. “It is highly recommended that one (or both) of the student’s parents sign the lease agreement as a tenant with their child as the occupier. This will have the effect that they would be jointly and severally liable in terms of the lease agreement as the student. This will safeguard the landlord from a situation where a student fails to pay his rent. Suppose the parents are tenants, the moment the student is in breach of the lease agreement, be it by not paying the rent or by not complying with the house rules. In that case, the parents will also receive the letter of demand and the prospects of resolving the matter amicably and effectively increase dramatically.
The Rental Housing Act deals with multi-let accommodation, specifically in requesting the landlord to formulate a set of house rules to regulate the relationships between the occupants of a multi-let property, which would be the case in a student lease agreement for a room in a house. These house rules can deal with things like sleepovers, study times, pets, parties at the premises, and details around the do’s and don’ts in the communal areas. It is advisable to display these house rules throughout the property and to send reminders of the content to all tenants regularly.
The Rental Housing Act is very clear on the terms that have to be included in a lease agreement and the things that have to be dealt with.
For more information on Just Property, please visit www.just.property or call (087) 583 3333.
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