Student Accommodation entices Private Money in Africa

The dearth of quality affordable student housing close to places of higher learning is driving a wave of investment in Africa.

Africa Property News has learnt that the dearth of quality affordable student housing in Africa, close to places of higher learning, is driving a wave of investment in this niche accommodation sector.

Student housing has become a very attractive vocation for the private sector given the severe shortage of it in Africa.

Industry players say the rising number of university students who need to be housed in privately owned accommodation off campus has also created attractive buy-to-let opportunities for investors.

Historically, accommodation for students has been provided by tertiary institutions themselves, but as operating budgets are slashed and property becomes increasingly expensive to acquire and maintain, many universities are outsourcing the provision and management of student accommodation to independent companies and in many instances partnering with them to do so.

According to the Department of Higher Education’s Ministerial Review of South Africa’s University accommodation, less than 10% of first-year university students can be accommodated. In addition, much of the available on-campus accommodation is dilapidated, unhygienic and unsafe.

Ken Reynolds, Regional Executive of Nedbank Corporate Property Finance in Gauteng says that according the Department of Higher Education in 2009, it was confirmed that the shortage is extreme and that the lack of supply of student housing is one of the primary causes for poor performance and the high dropout rates at some universities.

“According to statistics from the Department, out of a student population of 530 000, there is currently only enough student accommodation for 100 000 students – this barely meets 18% of the demand. As the demand for student accommodation far outweighs supply, there are excellent investment opportunities available in this market.

“As a result, we may see the establishment of a new real estate investment trust dedicated to providing student accommodation in the future. And, although the buy-to-let market is currently depressed, student accommodation is one section of this market that is proving to be an excellent buy-to-let option for private investors, usually for a relatively small capital outlay,” he says.

Standard Bank, ABSA, FNB and Nedbank are some of the private financial institutions pursuing student housing as an investment in South Africa. They have recently partnered with a number of developers that are focusing specifically on addressing this critical student accommodation shortage.

Seeff Properties, an estate agent says however that student housing is maintenance heavy and that the property owners must be careful.

Seeff’s agents across the board agree that investors should keep in mind that although student accommodation is clearly in demand, these properties also require extensive maintenance.

The tenant turn-over can be very high and factors such as good security, wi-fi facilities, proximity to place of study, parking and access to public transport, gyms, bars and night clubs play a crucial role in the desirability of the property and its rental returns.