Why now is the time to purchase a buy-to-let student apartment

The real estate agent’s generic mantra that “it’s always a good time to invest in property” may be particularly pertinent now as the country nestles down with a new government and optimism around creating a more attractive investment environment. Sentiment aside, there are other factors that suggest the latter half of the year may just be the right time to finally commit to the buy-to-let market, specifically apartments close to higher educational institutions.

Rental market statistics

One of the factors to consider is that despite the rental market showing lower growth, at 3.7%, in the first quarter of the year when compared to Q4 of 2018, there is a longer-term upward trend anticipated.

This is confirmed by Johette Smuts, head of data and analytics at PayProp, the company which produces a quarterly Rental Index. “Despite the slightly lower growth rate, Q1 remains a good indicator of market recovery because you have to factor in a moving trendline that plots the average of a pair of consecutive quarters. In this case Q4 of last year, which at 4.1% was viewed as a turning point in breaking through two-year’s worth of quarterly, and consistent, negative growth.”

Smuts makes the point that regardless of negative economic indicators and investor sentiment, “even reluctant buyers need to live somewhere thus the demand for rental property may push prices up and lead to further rental market recovery in 2019.”

Average national rental

PayProp’s Rental Index also tells us that 31.7% of the properties that the company administers nationally are rented out for between R5-7,500 per month, the latter figure also proving as the national average rent.

This average is particularly interesting for those either already invested in, or looking to invest in a buy-to-let apartment close to higher educational facilities. An apartment is an obvious good starter property investment because there is an extremely high likelihood of rental, and there are many reasons for this.

• Not enough on-campus accommodation

Annually we read reports that on-campus residences are unable to fulfill the need for on-campus accommodation. At the start of this year for example, the Cape Peninsula University of Technology, which has more than 34,000 students, could only accommodate 3,302 in residence. Few, if any, universities have anywhere near enough on-campus residence options.

• Quality of on-campus accommodation questioned

Conditions at student residences are one of the major reasons for student protests. Students at the University of Witswatersrand included accommodation as one of their grievances when they initiated a hunger strike in February. At the University of KwaZulu-Natal, students burnt mattresses to demonstrate dissatisfaction with the quality of their beds.

• Upsurge in students from sub-Saharan countries

Mancosa, a provider of business and management studies, with campuses in a number of South African cities, has indicated that because of rapid growth in the sub-Saharan region, the demand for education in the region is outstripping supply. SA public universities are limited by a specific quota of foreign students, thus private higher education institutions are experiencing far higher numbers of applications.

• Internationalisation strategies

According to the Times Higher Education World University Rankings for Emerging Economies, South Africa has six institutions ranked in the top 100 of the 440 reviewed, which makes a good case for adopting internationalisation strategies. The University of Johannesburg (UJ) has one: to increase the number of its international students to 5,000 by 2020.

The current profile of a R7,000 pm rental apartment

With just six months of this year remaining before the surge of new applications for student digs overwhelms the higher educational institutions, as it does year on year, there is no better time to buy an apartment specifically as a buy-to-let investment. It provides time enough to explore the apartment landscape, to wade through the procedural process of ownership, and if necessary, undertake any renovations.

Here’s what you’ll be able to offer students for R7,000 a month (all apartments are currently advertised on the Private Property website and are within reasonable distance to higher educational facilities):

Johannesburg – Auckland Park

62sqm

2 bed, 1 bath, lounge, kitchen, carport, swimming pool, and patio in a safe and secure complex.

View this property here

Pretoria – Hatfield

55sqm

Modern 1 bed, 1 bath loft unit, with gate-keeper on premises.

View this property here

Cape Town – Woodstock

30sqm

Unfurnished studio apartment with communal pool and rooftop braai area. 24/7 security.

View this property here

Durban – Essenwood

53sqm

2 Beds, 1 Baths, one under-cover parking bay.

View this property here

Bloemfontein – Arboretum

148sqm

3 Beds, 2 Baths, 2 Garages, sun-room, double garage

View this property here.