Demand for student accommodation is showing no sign of slowing down, says Dean Wiid, an associate director for Galetti Corporate Real Estate.
Wiid said that recent interest rate hikes made by the South African Reserve Bank (SARB) Monetary Policy Committee had sent the property industry into a spin, with both homeowners and commercial property landlords scrambling to cover surging monthly repayments.
Despite this, student accommodation is the one sector of the property market that remains steadily immune to the impact of interest rate hikes.
On 25 May, the SARB increased interest rates by 50 basis points, in line with market predictions.
This marked the tenth-rate hike since November 2021, resulting in a total increase of 475 basis points. These rates are currently at their highest level in 13 years – a time when the impact of the global financial crisis put markets into chaos.
Experts in the property sector have expressed concern about the hike, as it adds additional financial burdens on consumers and commercial property owners who are already facing significant pressures in South Africa.
“Student accommodation continues to generate steady, profitable income streams for keen property investors and developers alike,” said Wiid.
“For the past one hundred years, thousands of students have descended on both small towns and large cities across the country in search of quality tertiary education and a place to stay,” he said.
Investors are now honing in on student accommodation in a high-interest rate environment due to its consistent demand. Wiid said there was a decrease in demand during the pandemic; however, now that classes have resumed to in-person the sector has come back stronger.
There is a lack of rooms and beds in university-provided student accommodation. Therefore, there is a high demand for student-focused developments.
“ (Regarding university-offered accommodation) preference is – justifiably – given to applicants from low-income backgrounds, as well as those moving from another part of the country, but every year there are thousands of students placed on waiting lists for residences,” Wiid said.
Savvy property developers have, as a result, introduced a wide range of student accommodation offerings at various price points to address this housing gap.
“The private student accommodation market received a significant boost following the introduction of the National Student Financial Aid Scheme (NSFAS), which funds degrees and in the majority of cases, includes a built-in rental subsidy to help students find housing close to their chosen campus,” said Wiid.
“Another factor contributing to demand is the natural desire young people have to live independently from their families during their university years, and those with the means to do so are taking full advantage of what’s on offer.”