MAIN IMAGE: Jaco Spies – GM of rentals for Harcourt Winelands/Atlantic, Graham Ross – general manager of Just Property Blouberg, Leslie van der Merwe – franchisee of Just Property Prime, Erika Le Roux of Just Property Pofchefstroom
Senior writer
As the residential market flattened and the no-change interest rate saw property remain out of the reach of many, what hasn’t changed is the demand for rental properties situated near universities and higher learning institutes. In fact, says Jaco Spies, GM of rentals for Harcourt Winelands/Atlantic, especially in Stellenbosch. “So much so that the demand for student housing is driving up rental prices amid the short supply,” he says.
Stellenbosch
He gives us an idea of what landlords/owners can expect for 2025 if they are providing 12-month rental contracts for unfurnished, no-extra units within a one-kilometre radius of a campus: “Bachelor—R13 000; 1-bed R14 500; 2-bed R18 600; 3-bed R24 000; and 4-bed R30 000. There is a 20-25% drop on these rental amounts for properties further away from campus.”
These high rentals are largely due to parking challenges, of which there is a huge shortage. “As a result, investors are snapping up free-standing properties, converting them where they can or knocking them down to built apartment blocks. The return on a student house with six or more rooms is obviously far better than renting out a two-bedroomed apartment, even if in the same proximity,” says Spies.
“It follows then that the demand to buy is firstly for houses, followed by apartments, then cottages.”
Another factor contributing to the high rentals is property rates and levies, which have been rising considerably since 2015. Investors might be keen to acquire a property with rental potential, but there are pitfalls, such as ensuring parents pay the rent on time and the obligatory maintenance, property rates, rental agent commissions, and levies. Students are often not yet responsible adults and will likely ignore maintenance red flags.
“One of the issues we have picked up on is that investors often don’t set foot on the property once they have purchased. Exacerbating this is that they are not anticipating unforeseen costs beyond general maintenance, plumbing or electrical faults. We make it clear to such property buyers that they need to set aside at least 5-10% of their rental income for upkeep, and if not used, keep it aside for roll-over years,” warns Spies.
On the other side of this tarnished coin, however, are really great returns IF the investor can keep the property for a minimum of 5-10 years, presuming the rental is covering rental commissions, levies and special levies where applicable, and capital gains tax.”
General student needs
Students generally seek 24-hour security, fibre Wi-Fi, coffee shop, gym facilities, walking distance to campus, undercover parking, and a backup power system. Spies adds that it is also better to rent out unfurnished accommodation to stands “as the yield on a furnished is basically the same, and owners also don’t need to use capital to buy furniture.”
Several Just Property agents also contributed to this topic. Graham Ross, general manager at the organisation’s Blouberg branch, concurs with Spies relative to Stellenbosh, adding that it has become a tradition for students to share rooms based on affordability and social benefits. “A new niche is Homestays, where students live with local families, which is popular with international students.
“A challenge for investors is the seasonal rental fluctuations, but apart from students, there are demands for rentals in the area from other sectors such as tourism and university events, hospitality such as guesthouses, agri winelands, mixed-use developments, and green investments as sustainability gains a stronger foothold.
Rhodes
Leslie van der Merwe, franchisee of Just Property Prime, located near to Rhodes University in Grahamstown, experiences the opposite to Stellenbosch agents. “We have plenty of vacant accommodation due to Rhodes’s strategy to target National Student Financial Aid Scheme (NSFAS) students. Most live in university residences, much like Fort Hare. And it’s no longer the university of choice for the wealthy student after the Fees impacted the uni Must Fall campaign.
The average rental in Rhodes is some R3500 per room, including water and internet, semi-furnished with bed and study desk, which is in response to requirements. However, van der Merwe says that debt default is approximately 90%. “The biggest challenge is that the request is for 10-month leases and that rental fees can’t recover the loss of the other two months. The result is that property rental fees are decreasing, which is an opportunity for investors to acquire great properties and low prices.”
Potchefstroom
Potchefstroom, however, presents a mix of Stellenbosch and Grahamstown challenges. Erika Le Roux of Just Property in the area says there is ample accommodation for privately funded students but a shortage for those accredited by the NSFAS.
“Commune-living such as room-sharing and apartments are popular, although overall, any accommodation is in demand. NSFAS largely drives the market, bearing in mind that such students are not allowed to make additional payments to their rental situation. Hence, water, electricity, Wi-Fi, and security measures have to be included in their monthly rental. They generally pay R3 200 per month, whereas privately funded students pay R3750 to R4 350 for a one-bedroom.”
NSFAS does come with some serious considerations. Renting to such a student offers no protection to the landlord’s assets. “We have very little recourse if a student causes damages or moves out with notice. Some even stay on the property despite knowing their funding has been withdrawn.
“I think if there was more certainty about NSFAS, investors could be considering specifically accredited properties. There are ample properties on the market at good prices, which opens this door, and when coupled with a strong rental market, translates into a really good investment.”
