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