Student accommodation interests investors

“Within recent years, South Africa’s student accommodation market has emerged as a key asset class, and has attracted a growing interest from investors, developers and private operators on auction floors countrywide”, says Auction Alliance CEO Rael Levitt.

Factors such as the swift development of South Africa’s middle class, rapid urbanisation and the influx of approximately 72000 foreign students, mainly from Africa, has resulted in a growing inability of tertiary institutions to house students. Recent figures from the education department show that the current provision of student housing in residences is approximately 100 000 for a student population of 530 000.  Meaning that on average, just under 20% of students nationally, will be able to find accommodation on campus.

“Whilst student numbers have significantly climbed in recent years, the lack of funding of tertiary institutions has created lucrative opportunities for a small number of niche developers and private property companies to take advantage of, and seize the opportunity of the high demand and low supply student accommodation market”.

Over the last few years, the sector has experienced impressive rental growth and attracted a healthy amount of investment when many other categories of real estate investment and development have struggled. With the living conditions of students playing a significant role in their overall performance, a higher end product has entered the market, offering low cost student housing options such as dormitory style shared accommodation rooms or flats within renovated purpose built blocks that offer modern amenities.

“Companies such as South Point Properties bought partially let office properties that were considered undesirable to mainstream investors due to factors such as insufficient parking, at good prices, and turned them into clean and secure student environments”.

Levitt maintains that this trend has had a particularly significant impact on areas such as Braamfontein in the Johannesburg CBD due to the high concentration of tertiary facilities in the area. “The rising demand amongst students for secure accommodation, within close proximity to such facilities, had an instrumental influence on the area’s rejuvenation”.

“In spite of the instability of the real estate sector, the lack of student accommodation facilities within close proximity to South African universities, are proving to be significant commercial drivers for investors and developer. The sector is thus anticipated to continue offering investment potential in both the purpose built and buy-to-let sectors, specifically in the current low interest rate environment”.

Auction Alliance have sold a number of properties to South Point Properties, including New Market Junction in Woodstock for R49 million , 10 & 12 Plein Street in the Cape Town CBD for R30 million, President House in Barrack Street for  R12.6 million and Stanhope Building in Claremont for R24.5 million

This year, Auction Alliance has also sold a student college in Braamfontein for R5.8 million, 46 Biccard Street in the Johannesburg CBD for R15 million and 249 Smit Street Braamfontein for R6 million

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