Thursday, January 17, 2013

The pitfalls of private student accommodation


Author: Kentse Radebe  -  Moneyweb.co.za

14 January 2013 12:43

The pitfalls of private student accommodation

Catering for the lower end of the market presents significant challenges.

JOHANNESBURG – The increase in the demand for student accommodation has been beneficial for private property investors, particularly as the majority of students in private accommodation are funded through the National Student Financial Aid Scheme (Nsfas), administered by universities. However, Marius Minne, CEO of South Point properties, one of the largest private accommodation providers, argues that the funds are neither enough nor consistent.

South Point caters to over 90% of students who are on Nsfas.
Providing decent accommodation at an average price of R2 500 a month with rising maintenance costs for the lower end of the income earning segment of the market is nearing the impossible. In 2012 Wits University had 950 students who were on Nsfas and living in private accommodation. Wits allocated R19 000 a year per student towards private accommodation. At the University of Cape Town (UCT), 535 students were on Nsfas in 2012. The Nsfas allocation at UCT amounted to R11 400 per student but was topped up by UCT to R20 400. Both universities have existing relationships with private accommodation companies such as South Point and Aengus Properites, among others. As such, students must choose from accommodation offered by these companies or funding will not be provided.

The Nsfas allocation is falling short by about R4 600 and R6 000 a month. At the Durban University of Technology, students on Nsfas living in private accommodation are not funded, as the university has no control over accommodation. The shortfall is left for students to cover; according to the Ministerial handbook student’s personal accommodation debt stood at R85m in 2010.
Which leaves property companies in a conundrum.

The rising cost of maintenance is placing South Point’s profit margin under immense pressure says Minnie. The conflict for South Point currently is providing adequate housing for poor students whilst the demand for student accommodation continues to rise and push up prices. As accommodation costs rise, poorer students will increasingly find themselves in tough competition with those who can afford to pay for the cost of accommodation.

Pieter Bezuidenhout, a consultant at Seeff properties, estimates that student accommodation prices in Pretoria’s Hatfield can range from R2 800 to R4 500 per month. The reason behind the rising price increases, Bezuidenhout argues, is because prime space held by property companies catering to students is in high demand. Young working people are also competing for this accommodation because of its easy access to Gautrain routes.

South Point’s largest presence is in the Braamfontein student hub which provides quick access to transport services such as the Rea Via Bus Rapid Transit System, the Gautrain bus routes and taxi ranks within walking distances. The potential for catering to young working people is also growing says Minnie, but South Point currently only has one building catering for young working adults. The Department of Higher Education’s Review of Accommodation Handbook in 2012 revealed that the University of Johannesburg, Wits and UCT have limited land for development and that private public partnerships would be the only solution.

According to the ministerial handbook review the majority of student growth in the future is expected to come from poorer students. Private student accommodation property companies like South Point are one of the few that provides affordable housing for students. Universities alone cannot meet the rising demand for student accommodation. Robert Sherman, head of campus housing and residence at Wits University, expressed a similar view when he stated that Wits aims to cater for only 35% of its student populace.
Students who cannot keep up with costs will be forced to live further away from universities, depend on other transport means to get onto campus or seek alternative income to pay for the shortfall, Bezuidenhout said. Minnie argues that because of the important role that private accommodation plays, special dispensation needs to be considered for the sector because universities alone cannot provide accommodation for all its students.

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