Recent student protests in South Africa have caused concern among investors in the student accommodation market. However, despite the disruptions caused by protests, investing in student accommodation remains a resilient and profitable investment opportunity.
In fact, student accommodation has outperformed other commercial real estate sectors in recent years, with an average rental increase of 6.5% in 2020. This is due to the increasing demand for affordable, secure, and convenient accommodation options for students.
In this guide, we will explore the key considerations and opportunities for investing in South African investment properties and real estate investments, with a focus on student accommodation.
Why Invest in Student Accommodation?
South Africa has over 30 universities and over 100 other tertiary institutions, with over 1.4 million students enrolled. However, according to a report by the South African National Housing Finance Corporation, only 27% of these students have access to purpose-built student accommodation, leaving a significant gap in the market. With many students coming from outside the city or even the country, there is a significant demand for affordable, safe, and convenient accommodation options.
Student accommodation properties have the potential for high occupancy rates, as students typically rent for the duration of their studies. This means that investors can enjoy stable and predictable rental income, with the potential for long-term capital growth.
Key Considerations for Investing in Student Accommodation
When investing in South African investment properties, it is important to consider a range of factors to ensure that you make a sound investment decision. Here are some key considerations for investing in student accommodation:
Location: Look for properties located close to universities and other tertiary education institutions. Properties located in areas with high student populations and good transport links are likely to be in high demand. The proximity of the property to universities and tertiary institutions is a crucial factor that influences the demand for student accommodation.
Property Type: Consider the type of property that you want to invest in, such as purpose-built student accommodation or existing properties that can be converted into student accommodation. Purpose-built student accommodation may offer better facilities and amenities, but may require a larger investment.
Management: Determine whether you will manage the property yourself or hire a property management company. Managing the property yourself can save costs, but may require more time and effort. Effective management of the property is critical to maintain tenant satisfaction and ensure the property's long-term success.
Regulations: Familiarise yourself with the regulations surrounding student accommodation in South Africa, including safety standards and rental agreements. It is essential to comply with regulations such as building codes, fire safety, and zoning laws to avoid legal issues.
South African Real Estate Investment Opportunities
South Africa offers a range of real estate investment opportunities, including commercial, residential, and industrial properties. However, student accommodation is a particularly attractive investment option due to the growing demand for affordable and convenient housing options for students.
Investors can choose to invest in existing student accommodation properties or opt for new developments. Some developers offer guaranteed rental returns, which can provide investors with peace of mind and a steady stream of income.
Resilience of Student Accommodation Investments
Despite the challenges faced by the student accommodation market in South Africa, investments in this sector have proven to be resilient. In 2019, during the nationwide student protests, some student accommodation properties experienced a decrease in occupancy rates. However, this was a temporary setback, and the market quickly recovered, and we can expect the same recovery in the current national protests.
Furthermore, the COVID-19 pandemic has had little impact on the student accommodation market, with most students continuing to require accommodation despite the pandemic-related disruptions.
There are also a number of large-scale student accommodation projects underway in South Africa, including the new R1.2 billion student accommodation development in Pretoria. This development will provide 2,582 beds for students, further increasing the supply of quality student accommodation in the country.
Investing in student accommodation in South Africa remains a resilient and profitable investment opportunity, despite recent protests. With a growing demand for quality student accommodation, investors can expect stable rental income and long-term capital growth.
However, as with any investment, it is crucial to conduct thorough research, seek professional advice, and consider the key factors outlined above. With a growing student population and a thriving real estate market, South Africa offers an attractive destination for real estate investment.
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Disclaimer : None of the information contained here constitutes an offer (or solicitation of an offer) to make any investment, or to participate in any particular investment strategy. investRand does not take into account of your personal investment objectives, specific investment goals, specific needs or financial situation and makes no representation and assumes no liability to the accuracy or completeness of the information provided here.