Real Estate Investor Magazine South Africa April 2015 | Page 32

INSIGHT Student Housing Crisis Backlog of student housing despite additional funding BY ETTIENE PRETORIUS T here is still a backlog of student accommodation despite additional funding by the Department of Higher Education. According to Minister Blade Nzimande, “Plans are underway to build additional capacity at tertiary institutions.” However, “The governments allocation of R1, 6 billion in funding for student accommodation, together with the universities own funding of about R700 million, will only be sufficient to deliver an additional 9, 000 beds by 2016. This is not even sufficient to accommodate a third of the new enrolment, let alone deal with the backlog,” says Craig McMurray, CEO of Respublica, developers of student accommodation. “Considering the limited resources from government and universities, it is imperative that all parties engage far more meaningfully with the private sector to help alleviate the shortage, as recommended in the Ministerial review on Student Housing back in 2012,” McMurray adds. According to Ettiene Pretorius, when property investors examine the topic of student housing, a few factors of cardinal importance come to mind: 1) The town in which the university is situated 2) The price payable for a property (rent or buy) 3) The location and distance of the property from the university, and 4) Security. Finding a property close to the university (at an estimate of 1 km for most students), that is affordable, as well as safe. Then, yes, a crisis arises within the student housing market. Not the lack of property available. The question now is, why this is a crisis? The problem came in, when uneducated, emotional parents bought a property for the student entering university. Buying a flat with the student’s best interest at heart, finding a place that is close enough and safe enough has made the decision much easier to accept when purchasing the property at a higher price (buying with emotion rather than education). This ‘want to be’ investor now needs to rent the place out after the student finishes with university, leaving them with a rental price that has to cover the bond or a market related yield. “The problem came in, when uneducated, emotional parents bought a property for the student entering university.” The true investors, who timed their entry into the market and bought with the right intentions and knowledge, are now able to rent it out for the correct, market-related price (these units get filled quite easily). This, however, leaves the rest of the students with overpriced units and an emotional landlord. This is where the true crisis is, the ripple effect of buying without the right knowledge of the market. How do we address this issue? Real estate agents must educate these parents when they buy property, to buy long term, with the idea of investment. If you buy the property for the right price, you will be able to rent it out to other students for a much more affordable price. This will help clear up the backlog of students looking for housing near the university. Turn the ‘want to be’ investor into a true investor from the beginning. RESOURCES Respublica, Ettiene Pretorius 30 April 2015 SA Real Estate Investor www.reimag.co.za