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IT APPEARS THE general recession in housing has bypassed university towns such as Stellenbosch, Grahamstown and Potchefstroom as those continue to be underpinned by strong demand for properties that can be rented to students. Industry players say the huge shortage of accommodation on most university campuses means flats to rent and student digs in close proximity to a varsity have become a far more profitable option than general buy-to-let investments in non-university areas.
Current student rentals typically vary between R2 000 and R4 000/month/room, with accommodation close to university campuses fetching gross rental yields of 8% to 9%/year. Most buy-to-let investors in Johannesburg and Cape Town have to be satisfied with yields of less than 6%.
In addition, investors who own student accommodation in the places mentioned have seen capital growth of as much as 53% over the past year. That compares to price falls of 5% to 10% in most other towns and cities over the same period.
Figures from property research portal Lightstone show that in Stellenbosch - where 83% of all residential stock is sectional title units - average selling prices have increased 42% over the past year: from R1,056m in 2008 to R1,492m in the first 10 months of this year. Someone who bought a sectional title unit in Stellenbosch four years ago would have seen cumulative price growth of a whopping 145% since 2005 (see graph).
According to Lightstone's figures, house prices in Grahamstown jumped 43% over 2008/2009 - from an average R652 620 to R933 897. In Potchefstroom, sectional title prices are up a hefty 53% from 2008 to 2009 - from an average R288 193 to R438 688.
Pam Golding Property (PGP) group CE Andrew Golding says Stellenbosch and Grahamstown are two of only a handful of areas throughout South Africa that have managed to exceed their sales turn-over budgets for the year-to-date. Ongoing demand for student accommodation has no doubt been a key driver of sales activity, says Golding.
In Grahamstown, three- and four-bedroom homes close to the university campus suitable as student digs are in such short supply that there's nothing on the market for under R2m. PGP area principal Daphne Timm says 18 months ago you could still buy homes close to the campus for R1,2m. These properties would typically house four students at a combined rental of R8 000/month. Two-bedroom sectional title units in some of the newer developments typically sell for R700 000 and rent for between R4 600 and R5 000/month.
Paul Kruger, of Seeff Properties in Potchefstroom, says the office sold 26 properties in total in October, with half used to house students. Kruger says despite continued price growth two-bedroom flats close to the varsity can still be found for R500 000, with rental income at around R3 500/month.
PGP Stellenbosch manager Louise Varga says there has been no slowdown in demand for student accommodation from parents and buy-to-let investors in the area. Varga says investors typically hold on to their properties for five to eight years before on selling. For example, a bachelor apartment bought for R320 000 in 2001 recently sold for almost four times that at R1,2m. Two-bedroom units in new, upmarket complexes close to campus and the historical core of Stellenbosch sell for an average R1,8m and fetch rentals of around R8 000/month.
