AnalysisResidential News

Student accommodation a recession resistant investment

With an International Finance Corporation-projected national shortfall of close to 800 000 beds by 2025, student accommodation has become one of the most recession-proof, interest rate-proof and resilient property investments in South Africa.

This is particularly true in Johannesburg, where tertiary education institutions proliferate and the income stream from these investments is as proverbially certain as death and taxes, says High Street Auctions Director Greg Dart.

“Especially with the National Student Financial Aid Scheme (NSFAS) in play from the Department of Higher Education and Training, rental payments are guaranteed by the government for bursary recipients living in registered residences.

“The rates aren’t paltry either; according to the NSFAS website, monthly accommodation rental allowances for university students living off campus will match whatever on-campus residence fees are charged by their tertiary institutions.”

Dart says while many student accommodation landlords opt for NSFAS-aligned fees, the scope is actually a lot bigger.

“The drastic overall shortage of beds combined with feature-driven demand means the income potential is wide open for developers, in particular.

“Standard student accommodation choices in Johannesburg are anywhere from six-bed dormitories to single rooms that range in price from R2 000 to R7 000 a month, but these usually come with communal bathrooms, kitchens and living areas.

“If a developer can find a building with conversion potential in proximity to a large tertiary institution, the sky is the limit when – for instance – a number of cleverly-designed micro-apartments are factored into the renovation.

“In Johannesburg micro-apartments are prime student residences and since they usually feature private ablutions, basic cooking facilities and multi-purpose spatial functionality, they command a premium in the private market.

“Monthly rentals for these mini studios can easily exceed R10 000.

“What drives this market segment is students’ desire for the levels of privacy they enjoyed while living at home – particularly regarding bathrooms – while parents need to know their fledglings have 24/7 security, uncapped wi-fi, reliable transport links to and from university, and that they’re surrounded and supported by an education-focused, like-minded peer group.”

Dart says two lucrative student accommodation investment opportunities are on the High Street Auctions block this month.

“For investors wanting a turn-key solution, 39 Rissik Street in Marshalltown is a must-bid.

“St Andrews is an 11-storey building with five retail outlets on the ground level and 101 upmarket furnished student units from the 1st floor all the way to the rooftop. Each refurbished floor is equipped with communal bathrooms and modern kitchen facilities.

“St Andrews has a capacity of 352 beds which are fully let and occupied by students from a variety of institutions.”

The property has a GLA of ±4239m² under roof, and amenities include:

  • 24-hour manned security;
  • CCTV;
  • Biometric (Facial recognition per floor);
  • Uncapped wi-fi; and
  • Laundry facilities.

Projected net annual income for the building is approximately R10.5 million.

Dart says 23 Commissioner Street in Ferreiras Dorp in Johannesburg is another gem – this for developers looking for a student accommodation conversion opportunity.

“The portfolio for sale consists of three buildings; Eadie House, Orient House and the Market Street Parkade, which together comprise an entire block of Johannesburg’s CBD.

“More than 20 retail units anchor the precinct, which is currently topped by 80 residential apartments ripe for conversion to student units.

“The unique selling point of this lot is the 120-bay parkade; ample secure parking that commands a premium in the area.”

Unconverted, the projected net annual income for the precinct is R5.7m.

Dart says High Street’s July auction will begin at noon sharp on July 20th in the Grosvenor Room and Marquee at the Bryanston Country Club, 63 Bryanston Drive, Bryanston in Johannesburg.

“For bidders who can’t attend the auction in person, download the High Street Auctions app free from the App Store or Google Play.

“You can register for the auction on the app, watch the auction live and bid on the app in real time. Bidders from across the country, and indeed across the world, can compete for these student accommodation gems via their smartphones.”

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