Recent interest rate hike decisions made by the Monetary Policy Committee have sent the South African property industry into a spin, with both homeowners and commercial property landlords scrambling to cover surging monthly repayments. However, one sector of the property market remains seemingly immune to the impact of interest rate hikes – student accommodation.
Student accommodation continues to generate steady, profitable income streams for keen property investors and developers alike. For the past one hundred years, thousands of students have descended on both small towns and large cities across the country in search of a quality tertiary education, and a place to stay.
“Investors are honing in on student accommodation in a high interest rate environment due to ongoing demand,” says Dean Wiid, Associate Director for Galetti Corporate Real Estate. “There was a dip during the COVID-19 pandemic when many institutions closed their doors and pivoted to remote learning, but now that in-person classes have resumed, the sector has come back stronger than ever.”
Wiid explains that a key factor in the high demand for student-focused developments is due to the majority of university residences simply not having enough beds to meet the needs of their student population. “Preference is – justifiably – given to applicants from low-income backgrounds, as well as those moving from another part of the country, but every year there are thousands of students placed on waiting lists for residences.”
In response, savvy property developers have introduced a wide range of student accommodation offerings at a variety of price points to address this housing gap.
Student accommodation developments on the rise
“The private student accommodation market received a significant boost following the introduction of the National Student Financial Aid Scheme (NSFAS), which funds degrees and in the majority of cases, includes a built-in rental subsidy to help students find housing close to their chosen campus,” says Wiid.
“Another factor contributing to demand is the natural desire young people have to live independently from their families during their university years, and those with the means to do so are taking full advantage of what’s on offer.” The student accommodation offering includes:
Green Meadows (Potchefstroom)
Investors who want to capitalise on the booming student accommodation market have a rare opportunity to get in the game with the sale of the entire Green Meadows development. Galetti’s Corporate Services Division are handling this transaction via a sealed bid process, with final letters due by 22 June 2023.
Located in Potchefstroom and in close proximity to North-West University (and a number of other tertiary education and training institutions), the recently constructed, NSFAS-accredited development features 829 A-grade units with a 100% occupancy rate. It offers students an on-site gym, media centre, soccer field, swimming pool and laundromat.
“The primary consideration for the majority of students (and their parents) is affordability. A University education is already very costly and many families simply cannot afford an expensive monthly rental on top of that so clean, safe and affordable properties are in hot demand,” says Wiid.
“Green Meadows’ affordable price point has been rewarded with a 100% occupancy rate year after year, offering the right investor exceptional returns. It ticks all the boxes – superb location, great amenities, proximity to a large market and an established management team on-site,” he adds.
Volley Brooklyn (Pretoria)
Described as being ‘built around the needs of Gen Z’, Volley Brooklyn is located 950m from the University of Pretoria and offers 41 apartments ranging in value from R1.15 to R2.98 million. Construction began in April 2023 and all 41 apartments are already sold out – a strong indicator of the demand for purpose-built student living.
On-site amenities range from the standard – laundry services, 24/7 security, high-speed internet and study areas – to the thoroughly Gen Z, including access to therapists, a wellness café, electric scooter rentals and a luxury concierge.
The One Stellenbosch
Stellenbosch is notorious for its limited university housing and expensive land, resulting in the majority of private accommodation being offered at eye-wateringly high rates. Described as “the Rolls-Royce of student accommodation” by its developers, the R1 billion The One Stellenbosch began construction this year with an expected completion date of November 2024.
Located 750m from the university, it will offer students the choice of 508 luxury units, with studios starting at R1.55 million. Lifestyle features include a resort-style swimming pool, cinema, gaming room and a zen courtyard.
“There are a lot of student developments across South Africa to choose from, however, the key factors that separate the best from the rest are always safety, accessibility, affordability and amenities,” says Wiid.
“Students need to feel secure enough to focus on their studies without worrying about their well-being and safety. A balance of these factors creates an ideal living space that supports students’ academic success, well-being, and overall university experience,” he concludes.