The Truth about Student Housing

The Truth about Student Housing

Just when you thought that getting up for a ‘dawnie’ after a digs party was an existential problem, spare a thought for all those students that don’t have it that easy. Many students have to get up at 4:00 in the morning just to catch a taxi to get to lectures on time and end up studying for exams by candlelight in appalling living conditions. This is hardly conducive to getting good grades. The truth is that student housing in South Africa is in a crisis.

There just is not enough housing to accommodate all the students who want to study. Combine that with the fact that a huge percentage of South Africa’s population is of school going age and might just want decent access to student accommodation in a few years’ time, and it looks like the problem is only going to get worse!

The stats on student housing

A 2015 survey by The Times of nine tertiary institutions in South Africa revealed that of the one million students registered at private and public universities countrywide, there were only 68 419 spaces for the 140 000 residence applications. An example of this is the University of Cape Town which received 21 469 applications for student accommodation, yet was only able to accommodate 6 600 students. Similarly, Wits received 34 000 applications and was only able to accommodate 6 000 students.

The student housing crisis

The downside of this is that a large majority of students are then forced to commute long distances just to get to lectures and often have to make do with unsanitary and unsafe living conditions. Often students are also charged exorbitant rentals by exploitative landlords for what boils down to sub-standard accommodation.

According to the Department of Education, this crisis in accommodation is a primary cause of the high dropout rate at universities and poor academic performances, something which the country can ill afford at this stage. Universities have to deal with cutbacks from national government, budget constraints and as a result prioritise academic and teaching facilities, ahead of tackling accommodation issues head-on. Add to this the perennial problems of ageing residences and the fact that many universities do not have sufficient space around them for building development, and it’s easy to see why some institutions have resorted to outsourcing their accommodation needs to private developers and building managers.

Investment opportunities

That said, with the demand for student accommodation being so high, there are excellent investment opportunities available for the discerning buyer. For a relatively small capital outlay there are excellent buy-to-let options, as many parents of current or future students are willing to pay competitive rentals for residences which meet their criteria.

However, would-be investors must be willing to take several key factors into consideration. Chief amongst these is the location of the student residence. It should be easily accessible from the campus, i.e. within walking distance as many students don’t have vehicles yet, or should have close access to public transport routes that students could use. Also, residences that are sought after for student tenants are those that have security features installed so that parents can be assured of a safe environment for their children.

Characteristics of the student housing market

Many parents wanting more of a return on their money prefer not to rent but to buy a sectional title either for their own children to use while they study or to let out to other students. They then sell their property when the last child has completed their studies as there is a constant stream of buyers anxious to get their children into secure lodgings. This constant buying and selling of sectional titles adds to the volatility of the market and this continuous capital growth is characteristic of the student housing market. Many parents who sell their properties after their children have finished, experience a higher than average return on investment, some selling their properties at almost double the price they paid. Another feature of student accommodation is annual increases in rent as university fees are expensive and go up every year.

Many people with the ability to look long term are seeing these growth nodes in the student housing market for what they are – as golden opportunities for investment. If you are keen to explore these opportunities, contact the right team to help you access buy-to-let home loans.

Vincent Du Preez

Vincent Du Preez

Owner Homeloan Junction at Homeloan Junction
Vincent has many years of experience in the homeloan industry and provides a fresh look at financing in his blog posts. Full of useful tips and everyday topics.
Vincent Du Preez

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