Advice and Opinion

Pretoria offers plenty of buy-to-let investment opportunities for student accommodation

All over the world, the market for student accommodation has ballooned in the past few years and turned a niche property sector into a mainstream asset class that attracts billions of rands worth of investments a year.

For example, the latest student housing bulletin from the Jones Lang LaSalle Alternatives Division, which boasts the top student housing brokerage and consultancy team in the world, shows that trade just in the UK student housing market totalled £4,3 billion in the first nine months of last year, compared to only £1 billion in the whole of 2011.

The global market for student housing is estimated to exceed US$300 billion a year, and is set to grow even more, with student numbers expected to rise from the 165 million counted in 2011 to a total of more than 260 million by 2025.

In addition, although much student accommodation is now bought, sold and operated by international companies, institutions and real estate investment trusts, there is still a lot of room in the student housing market for individual private investors with houses, townhouses or flats to let. In the US, for example, privately owned off-campus accommodation still accounts for about 60% of all housing available to students.

And in SA, that percentage is believed to be even higher, as the latest available stats show that universities are able to accommodate less than 20% of their 530 000 students in official residences, and that the situation is probably even worse for at least another 500 000 students enrolled at technology universities, colleges and other tertiary education institutions.

Of course, some of the estimated 80% of students that must find private, off-campus accommodation will be able to stay at home with their families or with friends, and some will live in a student flat owned by one of the growing number of corporate players in SA’s student accommodation sector. But as things stand, that still leaves a gap of several hundred thousand student “beds” to be provided by individual investors.

And there is plenty of scope for such investors in Pretoria, says Bertie Lombard, the Rawson Property Group’s Waterkloof franchisee whose teams work in Hatfield, Brooklyn and Lynnwood – three of the suburbs with the highest demand for student accommodation.

“The city is home to many thousands of students attending the University of Pretoria (UP), the Tshwane University of Technology (TUT) and at least six large private tertiary education institutions. The headquarters of distance learning university Unisa – which has about 300 000 students worldwide – is also here, and there is a perennial demand for affordable student rooms and flats.”

Much of this demand has been centred on Hatfield, which is immediately adjacent to the 1120ha main UP campus and also houses most of the official student residences and the extensive university sports grounds, and literally hundreds of “student flats” have been built in the area in the past 10 years, mostly in the section to the west of Jan Shoba (formerly Duncan) Street as this is within easy walking distance of the campus, the Hatfield Plaza shopping centre and the Gautrain station.

“Prices of these flats range widely, depending on their floor area and distance from the campus,”
says Lombard, “and we currently have bachelor or studio units for sale at prices from R550 000 all the way up to around R950 000; one-bedroom units at prices from around R665 000 and two bedroom units at prices starting from about R1 million”.

“Rentals in Hatfield start at around R3000 a month for rooms in shared apartments and range up to around R10 000 a month for two bedroom, two bathroom apartments and although the monthly sectional title levies can be relatively high, most of the newer complexes boast excellent security and parking provisions as well as communal facilities like laundries and pools that give them greater tenant appeal, so the vacancy rates are very low. With Hatfield square now demolished, there will be newly developed shops and residential units available soon”.

“Another benefit of buying in this area is that because many of the complexes were purpose-built for students, there is little risk of a dispute with a body corporate or trustees that don’t like owners letting their units to students.”

The next most popular areas for students are Arcadia and Sunnyside to the west of the UP campus where, according to Anne Rich, the Rawson Property Group franchisee for these areas, the flats tend to be older but the rents tend to be substantially lower and there are also good shopping and public transport facilities.

“Many corporate investors have also moved into these areas over the past few years and they have now not only refurbished and modernised many buildings but also contributed to an upgrade of the surroundings, security and public amenities. There are also several new government buildings in Sunnyside, and the node is also home to two of the TUT campuses, the Boston College city campus, a Damelin campus and Rosebank College.”

Apartments currently for sale in Arcadia and Sunnyside include one bedroom units at prices from around R250 000, two bedroom units from around R400 000 and three bedroom units at around R600 000. Rentals, says Rich, start at around R1850 a month for rooms in shared apartments, R2500 a month for bachelor flats, and R3000 a month for one bedroom flats – and range all the way up to about R7500 a month for three bedroom units and R9500 a month for some newly-built two bedroom units. Equestria and Queenswood are slowly becoming a popular student rental area, given it’s close proximity to the N4, quick access to central Pretoria and UP.

Meanwhile, demand for student accommodation is also rising in Brooklyn and Lynnwood to the east of the UP campus, according to Lombard, as these areas boast a wide range of popular shopping, entertainment and sporting venues, and also offer easy access to most Pretoria campuses by municipal or Gautrain bus.

“However, apartment prices in these areas start at around R600 000 for small one bedroom units, so most student accommodation consists of rooms to let in communes, garden cottages and granny-flats. Rentals start at around R3200 a month for rooms in shared houses and R4500 a month for a one-bedroom cottage.”