According to Greg Dart, director of High Street Auctions, student accommodation in South Africa, particularly in Johannesburg, has become a highly resilient and profitable investment. The presence of numerous tertiary education institutions in Johannesburg ensures a steady income stream from these investments. The International Finance Corporation has projected a significant national shortfall of approximately 800,000 beds by 2025. Rental payments for bursary recipients living in registered residences are guaranteed by the government through the National Student Financial Aid Scheme (NSFAS).
The rental allowances for university students living off campus, as stated on the NSFAS website, match the on-campus residence fees charged by their respective tertiary institutions. While many student accommodation landlords opt for NSFAS-aligned fees, there is a much broader scope for developers to explore. Standard student accommodation options in Johannesburg range from six-bed dormitories to single rooms with monthly prices ranging from R2,000 to R7,000. However, these options usually come with communal bathrooms, kitchens, and living areas.
Developers have the opportunity to maximize their income potential by converting suitable buildings in close proximity to large tertiary institutions. Cleverly-designed micro-apartments, when incorporated into renovations, can offer a premium living experience and command monthly rentals exceeding R10,000. This market segment is driven by students’ desire for privacy, especially in terms of bathrooms, and the need for 24/7 security, uncapped Wi-Fi, reliable transportation links, and an education-focused peer group.
Grant Smee, managing director of Only Realty Group, acknowledges the historical gap in student accommodation and notes the increasing focus of developers on this sector, particularly in areas like Durbanville, Stellenbosch, and coastal areas like Gqeberha. Coastal universities such as Stellenbosch, Makhanda, and Cape Town are most in need of additional student housing, with Stellenbosch and Makhanda facing challenges in meeting the demand.
Alexandria Procter, CEO of DigsConnect, emphasizes the chronic under-supply of student housing in Stellenbosch and the urgent need for more developments. Other potential locations for student accommodation include Durban and the northern suburbs of Cape Town. NSFAS plays a significant role as the biggest stakeholder in the student accommodation space. Procter suggests that NSFAS should update their norms and standards document to align with modern living requirements, thereby increasing the availability of suitable properties for students.
To address the gap in student accommodation, Smee emphasizes the need for collaboration between the private sector, government, and universities to facilitate more construction. Affordability is another important aspect to consider, and government and university subsidies may be necessary to ensure students can afford accommodation in high-demand areas. Procter highlights the challenge of finding available beds, noting that a match between the price of properties and the targeted student demographic is crucial in the economically diverse South African market.
Regarding the location of student homes, Procter emphasizes the importance of proximity to campuses for easy access to classes, facilities, and the vibrant cultural life on campus. Alternatively, being situated along university transport links can facilitate convenient travel for students. Smee agrees, noting that accommodation should ideally be within walking distance or in close proximity to affordable public transport, considering that most students do not own cars. Access to nearby shops, healthcare centres, and other daily necessities is also beneficial for students who may not have the means to travel long distances.
In terms of interior offerings, Smee suggests that students require dedicated study areas in their rooms or quiet common areas, spaces for socializing, and amenities such as laundry rooms and reliable security within the building.
“High-speed internet is now a non-negotiable with the rise of remote and hybrid learning. With the rise of load shedding once again I would also urge developers to consider generators, UPSs, or inverters to allow them to continue studying when the electricity goes out.”
In addition to uncapped, super-fast Wi-Fi, “great security and safety features”, Procter says furnished properties get filled faster than unfurnished ones.
