Developments lead to a boom in the Stellenbosch housing market

One market within the Western Cape, namely the historic town of Stellenbosch, continues to be a healthy market that gets better each year, much like the long list of exceptional red wines that are produced in this area.

“We are seeing high demand in the student housing sector in terms of rental demands, with an average growth of 8,4% in rental returns per annum. In terms of annual growth in property value, the market indicates a moderate 13% growth. Bird Street, in particular, has experienced exponential growth since the latest development at 95 Bird street was completed (by JLK Construction) and Heuer Court on Bird at 69 Bird Street (by JLK Construction and replacing The W.Heuer - Musik Hause, situated 800 meters from campus) which launched towards mid-2019,” says Stiaan Vercuiel of RE/MAX Helderberg.

Priced from R1,450,000, Heuer Court on Bird has already sold over 20% of the total 42 apartments, with only 34 properties left. One of the reasons this development is selling so quickly is because of the high returns investors have come to expect within this market. “Based on the sales of previous developments in this area over the past two years, a 1-bedroom apartment within a new development can expect to generate a conservative annual growth of +/- R130,000 in the first two years after the launch date of the development. Investors are therefore quick to purchase within new developments in this area,” Vercuiel explains.

“On average, buyers searching for student accommodation in this area consist of around 70% parents and local investors, with foreign investors making up the other 30%. The market indicates that for buyers, first prize is to purchase an investment from a developer due to the savings one can make on transfer duty costs. Tenants, on the other hand, are more concerned with what the property has to offer in terms of monthly affordability and again, like the purchaser, location plays a big factor. Safe, onsite parking is another desirable feature, and with ever-rising fuel prices, tenants also look for nearby amenities.”

He adds that investors should be aware that not all developments will offer the same returns. “Some developments are truly entry-level investments, not only due to the price but also due to the lack of extra features. On the other hand, higher-end ‘entry-level’ apartments, would come standard with features such as built-in air-conditioning, name brand appliances, and solid wood cupboards, for example.”

According to Vercuiel, it is also important for investors to know who is building one of their most valuable assets to ensure they are investing in a quality product that won’t end up costing them a fortune in repair work down the line.

In terms of one last investment decision pitfall to avoid, Vercuiel advises investors to find out what the estimated levies would be, as the monthly repayments can quickly become expensive if it wasn’t budget for. As an example of what investors can expect to pay, Vercuiel says that the levies at Heuer Court on Bird will cost R1,500 per month and includes property insurance, safety features, outside maintenance of the Hydroponic Garden on the shared rooftop entertainment area.

“Investing in student accommodation in a market with a history of good returns is always a smart investment decision. I think that Stellenbosch holds huge potential for investors right now and would recommend buyers to explore what opportunities might exist for them within this market,” Adrian Goslett Regional Director and CEO of RE/MAX of Southern Africa concludes.

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