Real Estate Investor Magazine South Africa November 2019 | Page 17

T
he end of each academic year is a time where matric-
ulants prepare for their next academic transition from
basic education to higher education. South African
institutions of higher learning begin to strategise. The over-
arching point of discussion, which is deemed the biggest
challenge to South African universities is the unavailability
of affordable student housing. It threatens universities and
colleges. It also challenges their ability to create an inclusive
space for students originating from various parts of South
Africa and the world.
Students' safety and wellness is an important factor when
considering accommodation options. At the rate at which
depression and violence currently sits, there is a need for higher
learning institutions’ intervention with regards to their students.
However, in most institutions, not even half the number of enrolled
students are accommodated on campus. With an approximate
60% of students residing off campus (at private housing) there is
a great demand for affordable and safe student accommodation.
As a result of the unavailability of housing space at
institutions and the demand for residences from students who
have not been accepted into on-campus housing, rental prices
have increased and have become unaffordable for the majority
of students. Property owners who have leased their real estate
out as student accommodation make a lot of money out of
the students who are even willing to pay 30% more than they
normally do on their home premiums.
Signalled by the recent demonstrations by students
of higher learning institutions against higher education
fees (which expensive student accommodation forms
a large part of ), there is a need for affordable student
accommodation. This call deserves everyone's attention
from University stakeholders, private sector, investors,
developers, philanthropists, construction firms, political
parties, local, provincial and national government to local
business owners, tax payers as well as property owners and
real estate investors.
Within the student accommodation sector in South Africa
there are vast investment opportunities for real estate investors.
This became apparent at the annual Student Accommodation
Investment Summit held recently in Johannesburg. The
conference’s intent was to discuss possible solutions and
establish ways to speed up the provision of affordable houses.
As a result of the housing crisis in South Africa, a large
number of students outstrip the available spaces at institutions
of higher learning across the country. Current statistics show
a meagre 20% of eligible students that manage to secure in-
campus residence year on year, leaving thousands of students
to seek alternative off-campus residences.According to reports
published in 2011, the Department of Higher Education and
Training (DHET) conducted a study which revealed the severity
of the shortage in on- and off-campus student accommodation
at South Africa’s public tertiary institutions.
It cannot really be said that the South African government
has failed to address this scourge, but seeing that many
AFFORDABLE ACCOMADATION
strides have been pulled from as far back as 2009 – when the
department of higher education and training was birthed
(with no success) an intervention is needed. It is time investors
started working together towards attaining a stress-free
accommodation process for tertiary students.
With entrepreneurship and/or business ventures comes an
ultimate goal varying according to the individual’s aspirations.
This is predominantly to yield profitable returns, financial
freedom and sustainable long-term financial security. There
are plenty of considerations to be made before investing –
those of which are informed by the type of investor you are
and the structure of business development in your community.
Dustan Folkus, Sales Project Manager at Engel & Völkers
Developer Driven Projects, explains that investing in student
accommodation offers excellent returns. “Annual occupancy
is usually at over 97%, and both rental value and retail value
increase with the passing of each year. In other words, the profit
margin increases annually for investors wanting to generate
passive income, and for parents looking to buy an apartment
for their child. (As opposed to them renting for at least three
years). Well-located, well-maintained student property is a
solid investment,” says Folkus.
The challenge is always getting the right finance for
investments in any sector. It is no different with investing in the
student accommodation sector. Executive Chairman of Impact
Africa and financial market economic and business strategist,
Chris Hart believes that there is no such thing as easy finance
for investment into student accommodation. It needs a proper
project plan and projections. To evaluate the best investments it
must be based on commercial merit, people, risk and technology.
These are the creative ways to go about accessing finance:
Grant funding
Both foreign and local
Government
Tax incentives
Section 12J
ETI
Commercial funding
Direct investment
Private equity
Banks
DFI’s
Grant funding
In the Real estate investment and property sector there are
various financial assistance options for persons hoping to
penetrate through the student accommodation sector. These
include: Housing Impact Fund South Africa (HIFSA) which
finances the acquisition and construction of homes for sale
and rent that are affordable to the lower and middle markets,
as well as providing housing loans and rental accommodation
for families and students. Another option is the Financial Sector
Code (FSC) Fund. The Fund targets a range of opportunities
and innovations at the low-income level, including housing
microfinance, black SMME finance and mortgage finance.
SA Real Estate Investor Magazine NOVEMBER/DECEMBER 2019
15