South Africa faces an estimated shortfall of more than 500 000 student accommodation beds, presenting a significant opportunity for the built environment sector to play a transformative role.
Image: Chumani Mazwi
Many property owners near universities and colleges are sitting on hidden value without realising it.
A standard residential property located close to a campus, transport route, or student hub may have the potential to be converted into student accommodation - creating higher rental income and higher long-term property value, says Nokwethemba Shilenge, a professional town planner at KwaZulu-Natal-based Ithemba Town Planning Services (ITPS)
However, Shilenge says this cannot simply be done by moving students in.
“Most municipalities require compliance with planning controls, zoning rights, parking standards, building regulations, health and safety requirements, and neighbourhood impact considerations.”
Common requirements may include:
In February, Steve Munyao, convener at Africa Student Housing Forums SA, faced an estimated shortfall of more than 500 000 student accommodation beds, presenting a significant opportunity for the built environment sector to play a transformative role.
He said this deficit, driven by rising enrolments at public universities and TVET colleges, urbanisation, and limited on-campus capacity, creates strong demand for new, affordable and purpose-built student accommodation.
Opportunities span the full built environment value chain, including planning and design, construction, engineering, quantity surveying, project management, and facilities management, he said.
In March, Stephan Potgieter, CEO of BetterHome Group Mortgage Origination and BetterBond, said student accommodation remains an attractive investment option, largely due to growing demand for private housing.
He said in high-demand towns, buy-to-let investments offer steady rental yields and solid capital appreciation. From Cape Town to Johannesburg and smaller university towns across the country, demand for student housing continues to exceed supply.
In Braamfontein, for example, strong demand makes it possible for investors to achieve rental yields of up to 16%, according to property reports.
"African Investor" reports that the gross yield of studios and one-bedroom apartments near Stellenbosch University is around 7.5%. Well-located properties close to campus typically have low vacancy rates when priced correctly and leased in line with the academic year, added Potgieter.
Student accommodation is categorised as residential property, and the accommodation is treated as the students’ primary residence during their studies, Cllr Siseko Mbandezi, City Mayco Member Finance at the City of Cape Town (CoCT), told "Independent Media Property" recently.
“The owners of student accommodation are therefore rated at the same level as a residential property. Business and commercial rates are not levied. Student accommodation facilities are responsible for paying municipal rates and service charges.”
Properties close to campus or along safe transport routes tend to sell and rent more quickly.
“Students prioritise convenience. They want to walk to lectures and social activities,” said Potgieter.
Safety is also a major consideration. Properties in well-lit, established neighbourhoods are particularly sought after, as parents place a premium on security. Even a property located one or two kilometres further from campus may remain vacant for longer or demand a less competitive rental.
The group said apartments within developments that offer amenities such as laundry facilities, gyms or nearby retail outlets are particularly attractive to students.
Beyond location and amenities, it said funding structures also play an important role. With more than 600 000 South African students relying on funding from the National Student Financial Aid Scheme (NSFAS), some tenants may depend on a housing allowance to pay for accommodation. However, students can only access this allowance if the property is accredited by NSFAS.
“While the benefit of accreditation is that demand is high and vacancies are unlikely, investors should be aware that NSFAS-funded students carry a different risk profile from privately funded tenants,” noted Potgieter.
He said there may be payment delays, particularly during registration periods when verification issues hold up disbursements.
This could create a short-term cash-flow gap at the start of a lease. In addition, NSFAS sets maximum accommodation allowances per region, effectively placing a rental cap on accredited properties. This may not work for apartments in more upmarket residential developments.
While high occupancy rates and steady interest are among the advantages of investing in student accommodation, these properties often require additional upkeep. “Because of increased usage and annual tenant turnover, student properties may require more frequent maintenance and repairs,” said Potgieter.
Ithemba Town Planning Services says it can assist property owners and investors by assessing whether a site has potential and guiding the approval process professionally.
They say their services include
Before property owners invest or convert, Shilenge says they should always check the planning rights first. She adds that a quick professional review can save months of delays and costly mistakes.
Independent Media Property