Demand for student accommodation a key driver in Stellenbosch's buoyant residential developments market

Such is the surge in demand for student accommodation in the university town of Stellenbosch in the Cape Winelands, that investors – and parents – are snapping up units in sectional title developments designed to cater to this lucrative market.

According to Louise Varga, Pam Golding Properties area manager for Stellenbosch, Somerset West, Gordon’s Bay and Strand: “The accelerated demand for student accommodation has pushed up property prices, especially sectional title properties close to Stellenbosch University campus.

“This demand translates into meaningful capital returns on investment for astute buyers, particularly those who acquire units on or soon after launch.  For example, a buyer who purchased an apartment for R2.4 million in Beau Vie sold it for R2.8 million a year later, achieving a 17% capital return in just one year.

“In another instance, we sold an entire apartment block Beau Vie 2 off plan to an investor even before it came to market, as he understood and seized the opportunity to capitalise on the high demand for student accommodation in Stellenbosch.”

Continues Varga: “In 2015 a two-bedroom unit in Andringa Walk sold for R2.65 million and was rented out for R9 400 per month, while today, a two-bedroom unit in this development sells for over R4.7 million and achieves rentals of R24 500 a month. The capital growth achieved in eight years is almost 77% while the rental has increased by 160% over the same period, and even during Covid, rental demand continues to increase exponentially, exceeding supply.

“In 2010, we sold erven in the development, Brandwacht aan Rivier for R995 000 to buyers purchasing off plan, with some selling their erven three months after transfer for R1.495 million – that’s R500 000 or just over 50% more than they paid for them, which underscores the benefit of getting in early on these new developments.

“Furthermore,” says Varga, “a new development like Newinbosch, that offers a wide variety of homes and accommodation plus an endless list of amenities has sold over R200 million in residential property in just five months, on one estate.”

Student accommodation is among the fastest-growing property sectors globally, with a similar trend appearing evident in South Africa where the supply-demand gap for this asset class is widening. According to estimates by the World Bank’s International Finance Corporation, the shortage of student beds in SA will reach 780 000 by 2025. This makes an investment in accommodation close to universities such as Stellenbosch University, and educational institutions, a viable choice for those seeking strong net yields and solid capital growth.

Says Varga: “Over the years the student accommodation market has evolved with more amenities offered and security a firm priority. A new two-bedroom unit now includes two bathrooms and two parking bays, while developments are starting to cater for load shedding. At My Space, modern-designed apartments in three different venues – My Space@Drostdy, My Space@Dorpstreet and My Space@Paradys, there will be WiFi in all communal areas during loadshedding, while these blocks also include a number of social spaces, game rooms, gyms, private courtyards, special study spaces, a zoom room, deli, laundry, and braai.

“Taking into account the growing need for student accommodation, the local council has adopted the densification process, with new developments being renovations or rebuilds of older buildings. To illustrate, My Space@Drostdy was formerly the Drostdy retail space, Stellenbosch Lodge is now an apartment block called My Space@Paradys, and in developing The Niche, three adjacent houses were acquired, the erven consolidated and an apartment block constructed on the site.”

At present Pam Golding Properties is marketing units in 14 residential developments in Stellenbosch – comprising eight sectional title apartment blocks, all of which cater for students or young professionals – and five general residential developments.

At present, sectional title blocks catering for students only are: Da Vinci, Archimedes and Deo Gloria, while sectional title blocks for young professionals or student accommodation are: The Niche, My Space@Paradys, My Space@Drostdy, My Space@Dorpstreet and The Alxandr. Prices at these developments range from R1.75 million to R 5.45 million for loft, one-, two-, three, or four-bedroom apartments.

Other residential developments marketed by Pam Golding Properties in Stellenbosch include Welgegund Domaine Prive, Newinbosch, Longlands Estate, Oakview Estate, and Vini Fera at Anura, at a broad cross-section of prices ranging from R875 000 to approximately R13.69 million, depending on the development and whether you buy vacant land or a house.

Varga says that apart from local purchasers, Stellenbosch has in recent years experienced a marked increase in semigrating home buyers, prompted by good schools, exceptional service delivery, and an enviable lifestyle. Proudly a student town, it’s historical with an abundance of natural beauty, majestic mountains, world-class wine farms, and in relatively close proximity to Cape Town International Airport.

Adds Varga: “Approximately 47% of our buyers are locals in Stellenbosch, 24% from Gauteng and KwaZulu-Natal, 21% to surrounding towns in the Boland & Overberg and Western Cape in general, and the remaining 8% are purchasers from other provinces and international buyers. Upcountry buyers tend to rent for a year before they buy, which accounts for the high proportion of Stellenbosch buyers – who include savvy buy-to-let investors catering to the high rental demand while achieving wealth creation through astute property investment.

“In Newinbosch, located on 48ha at the northern entrance to Stellenbosch, and only 3km from the Stellenbosch CBD, the university, college, schools, hospitals, Technopark, and other business parks, buyers have access to a diverse variety of options across all price ranges. A total of 1 320 units across apartments, simplexes, townhouses, courtyard homes, and homesteads are complemented by a host of amenities including a retail centre, crèche, primary and high schools, church, clubhouse, eatery, gym, tennis courts, dog park, skateboard park, amphitheatre, urban farm, 25m swimming pool, children’s pool, cycling and running routes, cricket nets and children’s play areas among others.”