Gap housing enhances wealth creation

18 Apr 2013

The latest research into the provision of affordable housing in the so-called gap market in South Africa shows that it not only brings with it improved welfare and social cohesion, but is also an important facilitator of opportunities and wealth creation.

The latest research into the provision of affordable housing in the so-called gap market in South Africa shows that it not only brings with it improved welfare and social cohesion, but is also an important facilitator of opportunities and wealth creation.

The study found that those who obtain homes in this sector move beyond viewing them as a mere shelter.
Instead, their homes become assets and through appreciation of these assets entrepreneurship, job creation and/or access to higher levels of education are stimulated.
The research was conducted by a team led by University ofCape Town associate professor Francois Viruly.
It is the second such study commissioned by International Housing Solutions (IHS), a global private equity investor which has pioneered the financing of numerous affordable housing projects in South Africa with a total value of almost R8 billion to date.
The primary focus of the research was to assess the direct and indirect benefits to tenants and owners of housing units provided by IHS, to assess the social and economic benefits of living in developments like these which are changing the face of SA suburbs.
The study also aimed to establish whether such affordable housing developments meet the objectives of government policy regarding sustainable human settlements.
The research was expanded this year to include some 500 households across more than twenty different developments.
The survey also considered the views of students who this year made up 17 percent of the respondents.
Affordable housing refers to households with an income between R3 500 and R18 000 per month.
People in this segment earn too much to qualify for government’s low-cost subsidised housing and too little to afford the cheapest standard private sector houses or to qualify for bonds. This is why it is known as the gap market.
The report points out that according to Absa’s March 2013 House Price Index report, small houses (80-140 square metres) have the highest price appreciation at 17.5 percent nominal growth annually.
Houses in this category (and smaller) make up the majority of IHS units with households falling in the affordable housing band having incomes of between R7 500 and R15 000 per month.
Among the major reasons listed by respondents for moving to an IHS funded development was a desire for better access to their places of work, an improved and safer environment, proximity to schools, and financial considerations.

This year’s study also corroborated last year’s findings that the construction of houses in the affordable housing developments of IHS created over 51 000 direct and indirect jobs.

Looking at the welfare improvement of respondents, the study found that overall 72 percent thought their quality of life had improved while only 3 percent of respondents believed their life had worsened to some degree.
The biggest improvements were noted in respect of leisure time, social life, health, access to education and employment opportunities.
An important factor impacting on people’s decision to move to one of the developments included in the research was the ongoing discriminatory impact of apartheid-era spatial planning on household transport spending.
In Gauteng, research shows people spend 21 percent of their income on transportation, which is among the highest in Africa and more than double that of most other major African urban areas.
Commenting on the research findings, IHS managing partner Soula Proxenos says while government’s RDP housing initiative has been a unique and successful programme, there was a need to fix the whole housing spectrum.
“Housing is like a ladder, if there are rungs missing, the ladder is broken.”
Proxenos says creating housing stock in the gap market gives previous RDP households housing to move up to.
If there is nowhere for these families to go to then they are not able to improve their lot and new families then are not able to move into previously used RDP housing.
“Government cannot fix the whole housing ladder and the gap market is ripe for private sector development, especially of the right kind of sustainable initiatives which allow more people to join the formal housing ladder in the affordable housing sector”.
She says traditionally housing in the lower end of the market offered only a shelter role, but housing in the affordable sector enables a broadened role.
“Housing becomes an asset that appreciates, stimulates economic activity and creates wealth. In the USA it is the single biggest source of funding for new business creation.”
She points out that the units play a role as a financial asset and a majority of those interviewed during the research believed the value of their assets had indeed increased.

Viruly says that increasing the affordability of housing as an asset together with the appreciation of this asset should in turn stimulate increased entrepreneurial activity as well as access to higher levels of education.

Viruly says that increasing the affordability of housing as an asset together with the appreciation of this asset should in turn stimulate increased entrepreneurial activity as well as access to higher levels of education.
According to the Global Entrepreneurship Monitor Extended Report – 2011 published last year, 9.1 percent of adults aged 18 to 64 in South Africa are involved in early-stage entrepreneurial activity with 2.3 percent being established business owners compared to 12.3 percent and 9.1 percent respectively in the US.
Increasing entrepreneurship in South Africa through affordable housing will also lead to increased employment as entrepreneurship has been shown to be a key contributor to job growth globally.
In the US it has been the primary source of job growth for the past 30 years.
This year’s study also corroborated last year’s findings that the construction of houses in the affordable housing developments of IHS created over 51 000 direct and indirect jobs.
Over the 10-year life of the IHS fund some 100 000 man years of employment will have been created.
During the past two years affordable or gap housing was given increased prominence by government. Various programmes and subsidies have been established and many related issues – also those covered by Viruly’s research – are included in the National Development Plan.
Government’s “Breaking New Ground” policy is focused on increased housing delivery; housing as an asset, creating sustainable human settlements where housing developments are integrated with social infrastructure, creating employment; and creating social cohesion.
Viruly’s research supports government findings that massive urbanisation was constantly adding to the housing backlog which includes the gap market. Gauteng’s population, for instance, could increase by a further 10 million people over the next 30 years.
A specific need for affordable housing for the urbanised and urbanising middle class has thus been identified, which government alone cannot address and for which private sector participation is crucial.

Landlords not to blame

Northcliff Melville Times 9 April 2013

Jeanrique Snyman

Jeanriques@caxton.co.za

NMT Times

STUDENT landlords need to be commended for their efforts in contributing to the evolution of South Africa and progressively addressing a severe challenge in affordable housing nationally, said chairman of the University of Johannesburg Accommodation Executive (UJAX) Caj van Zyl. Van Zyl was responding to news that fraudulent documentation had enabled the accreditation of communes belonging to a single owner (UJ turns a blind eye to commune fraud, week ending 29 March).

"The committee was established to deal with the challenges, opportunities and threats regarding student accommodation for UJ students. We are all forward thinking, qualified and progressive with our thoughts, strategies and the implementation thereof," he said.

An accommodation provider for over 20 years, Van Zyl conceded that there were still kinks in the system,

but defended commune owners who in his view had done much to improve the quality of accommodation

available to students.

"Serious questions are being raised about the enforcement of the commune policy to address the housing challenges that are facing us. We agree with the standards that are proposed but not with the implementation thus far with respect to the application procedure and related costs.

"Previously run down properties have been renovated at extensive cost to provide quality accommodation to

the next generation of our country. These investors and entrepreneurs are proactive and are helping to address a serious South African problem and challenge," Van Zyl said.

"The inefficiency of the City of Johannesburg (COJ) to speedily process applications , removal of red tape conditions, consistent negative and inaccurate press is not assisting the challenge."

Ward 69 councillor Katja Naumann agreed.

"To date UJ has accredited far over a hundred communes for 2013 but only 32 of those communes have been granted legal consent by COJ." Naumann also took flak for a misconstrued comment.

"My comment that 'UJ has lost the plot' was construed from a conversation in which I commented on the accusations and counter accusations involving a fraud case being investigated by the UJ Office of Off - Campus Accommodation and was most certainly not aimed at the larger institution," she explained.

Student accommodation solutions

Property 24.co.za 
28 Mar 2013

Partnerships between the private property sector and the country’s academic institutions is a credible solution to providing safe and affordable accommodation for thousands of students, says managing director, Kirstin Schubach of student accommodation specialists, the Aengus Property Group.

Salvation Mansions in Durban is one of Aengus' properties.

Schubach was commenting after shortages of student accommodation led to protests at the University of KwaZulu-Natal (UKZN) when hundreds of students were left on the street. UKZN registers up to 44 000 undergraduate and postgraduate students each year, but can only provide accommodation for 10 917 students - about 25 percent of its student body.

“Universities around the country are suffering from a shortage of student accommodation, mainly because of the massive investment needed to build and maintain student residences and the surge in the number of students attending tertiary institutions,” says Schubach.
According to Schubach between 50 and 80 percent of students attending these institutions require accommodation, but there simply aren’t enough beds.

Aengus currently owns and manages 30 student buildings around the country.
In Durban, it has spent more than R4 million converting old buildings into stylish student accommodation.
It owns and manages three buildings near the Durban University of Technology and plans to open another, Aengus Doonside, near UKZN in May this year.

This can accommodate another 154 students in two and three-sleeper units.
“Students are discerning consumers and are increasingly looking for clean, safe accommodation with all the modern conveniences at an affordable price,” says Schubach.
She explains that their model is aimed at enabling students to work and play in a way that they’re able to get the most out of their tertiary education.

Aengus is renowned for successfully pioneering the conversion of mothballed commercial buildings aroundSouth Africa into upmarket loft-style apartment buildings in close proximity to universities.
 Its units are fully furnished and kitchens fitted with fridges. To keep globally connected, each unit comes standard with Wi-Fi and free access to 300mb of data per month. Technology extends to security features, with buildings equipped with fingerprint access control and a 24-hour guard.
“The result is that our buildings in KwaZulu-Natal are fully tenanted, we operate a tight ship, with stringent tenant selection criteria and governing rules for these buildings.”
All buildings are situated close to academic campuses, saving students and parents monthly transportation costs.

The buildings are maintained by Aengus Portfolio Management, a division of the Aengus Property Group, which has an impeccable track record of managing its students and keeping the buildings in good condition.
Students can expect to pay between R1 800 and R2 350 per month on a 10 month lease.
“There is clearly a dire shortage of decent student accommodation at South Africa’s tertiary institutions, but private players with property management experience and the balance sheet to invest in upgrading and maintaining buildings can positively contribute to improving the situation,” says Schubach.
She adds that this approach also frees up universities' budgets and enables institutions to focus on their core business – educating students.

Pretoria student housing complex built illegally - Post | IOL.co.za

Pretoria student housing complex built illegally - Post | IOL.co.za

Accommodation fiasco costing UKZN dearly

Accommodation fiasco costing UKZN dearly

NSFAS and student accommodation reforms vital for redress in higher education

DA Youth

Yesterday I made a submission to the Ministerial Committee for the Review of the Funding of Universities, chaired by Cyril Ramaphosa. The aim of the Committee is to review the university funding framework in its entirely and propose changes that would serve to accelerate the realization of the transformation goals for the university education system, among them improvements in teaching quality and progression rates and more equitable student access to higher education.

The DA Youth’s submission centered on two key areas that we believe must be addressed in order to realize the transformation goals and achieve real redress in higher education, namely access to and repayment of National Student Financial Aid Scheme (NSFAS) loans and access to decent student accommodation.

The NSFAS was originally setup to assist with the realisation of the ideal of universal access to tertiary education by offering financial aid via loans and bursaries to deserving students. However, it has become clear that, with only 19% of NSFAS beneficiaries to date successfully graduating, the scheme has failed unequivocally to deliver on in its mandate in its 12 years of existence and it needs to be fundamentally overhauled.

Some key proposals regarding NSFAS I made to the committee today include:

- Allowing students to repay NSFAS loans through service to state on a year for year basis. This would assist cash strapped graduates with meeting loan repayment obligations, facilitate on the job training for inexperienced graduates, as well reinvigorate the ailing public sector with an influx of new skills.

- Conduct loan recovery through SARS to address the woefully low NSFAS loan recover rate, which is currently the second lowest recovery ratio globally among student financial aid schemes.

- Only charge interest when the student completes their studies, not from 1 April of the year in which the loan is granted.

- Link the loan to bursary conversion ratio directly to academic performance to encourage the pursuit of academic excellence.

As well as obtaining access to funds to pursue the desired field of study, an issue almost equal in relevance to a student’s success is access to accommodation facilities. The bulk of students in today’s tertiary education system come from previously disadvantaged backgrounds and do not have the means to materially support themselves whilst studying.

Despite this, there are only 107 598 beds available for the approximately 535 000 learners currently enrolled in South Africa’s 22 residential universities.

A student cannot be expected to perform academically if they do not have a safe space in which to live whilst completing their studies. At present NSFAS loans also do not cover food for many students, leaving them hungry. The severity of this problem has been illustrated by stories of desperate students resorting to prostitution simply in order to afford food.

Some key submissions made to the committee regarding access to decent student accommodation include:

- Explore public-private partnerships for building and managing residence infrastructure. This will have the dual benefit of both reducing the massive cost to the state of building residences, as well as increase the capacity of universities to meet the student housing demand.

- Standardise the NSFAS accommodation package rate so that students pay similar fees across all institutions and the NSFAS accommodation subsidy is therefore guaranteed to cover a core minimum of services.

- Expand the range of NSFAS funding for accommodation to 70% of students on previously disadvantaged campuses where alternative accommodation is generally unavailable.

- Enforce a minimum standards code for student housing in terms of elements such as room size, security and access to sanitation and catering facilities to address the quality crisis in student residences, many of which are deemed unfit for human habitation.

The submissions made by the DA Youth to the committee today are driven by the desperation of students, for many of whom violence has become a way of life as they resort to physical protest against the failings of NSFAS. The DA Youth believes that, if seriously addressed, the proposed reforms we have made to the Committee would significantly boost the government’s ability to provide access to quality tertiary education to all South Africans.

Media enquiries:

Mbali Ntuli
DA Youth Federal Chairperson
072 118 8556

Aimee Franklin
DA Youth Director
072 232 0127

- See more at: http://www.dayouth.org.za/university-funding-review-nsfas-and-student-accommodation-reforms-vital-for-redress-in-higher-education/#sthash.PMSdUXfU.dpuf

Property

Author: Micel Schnehage - Moneyweb.co.za

Student housing: An investment opportunity?

Long-term investors stand to benefit.

JOHANNESBURG – Property developers, investors and parents are taking advantage of a massive backlog in student housing to enter what could potentially be a lucrative investment.
There also appears to be a growing trend in the number of private investors and parents climbing on the bandwagon by buying residential units to let out to an annually growing number of students signing up for tertiary education.

This is especially true in academic hubs like Potchefstroom in the North West province, Stellenbosch in the Western Cape and Grahamstown in the Eastern Cape.

Principal of Independent Property Consultants (IPC), Monika Gaybba, says in the past three or five years, Grahamstown has seen a plethora of student developments but these have slowed down considerably. This means, however, that the town now has a healthy supply of potential student housing investments.
Gaybba says prices and rentals on student accommodation vary:

• R485 000 for a 39m² one-bedroomed unit close to Rhodes University with a rental return of around R3 800 per month;

• R800 000 for a 50m² two-bedroomed unit with an income of R6 048 per month, and

• R950 000 for a 93m² three-bedroomed flat with a rental income of around R7 500 or more monthly

Gaybba says properties in Grahamstown have increased in value over a three to five year period which means that parents have not only recovered their money from their initial investment but have saved on accommodation for their student children. “Some parents sell the units once their children leave the university and some retain their investment and purchase other property to increase their portfolios with a variety of rental options. This is also due to confidence in the local market,” Gaybba told Moneyweb.
She added that investors comprised local, national and international buyers, including the parents of students. Others included academics, business or retirees seeking a good return on their investment. “The number of rental defaulters on students is less than on other residential properties being leased as students usually have a set rental budget,” said Gaybba. Many students are allocated fixed budgets in terms of bursaries and other financial assistance.

Pam Golding Properties’ (PGP) director Boland and Overberg, Louise Varga, says in Stellenbosch there are 12 700 investment opportunities in student accommodation with 6 000 of them being in the sectional title sector. “That tells you how huge the apartment market in Stellenbosch is,” Varga told Moneyweb at the annual Pam Golding media day in Cape Town on Wednesday.
Varga says the infamous town of Stellenbosch experiences an annual “apartment season” starting largely in September through to November where owners of these apartments wanting to dispose of their assets put properties on the market and those seeking student housing put in offers, including parents of prospective students.

“If you put in an offer in September, then you have October, November, December for transfer,” Varga said. Rental renewals usually occur in the same preceding months for the following year. Those choosing to hold onto their investments can then sign new leases in December for the following academic year.
Prior to the 2008 global economic meltdown, Varga said buyers were mostly investors seeking a yield on their investment. “Right now, we have more parents buying than investors,” she added.
Asked what the rough return on investment was on student accommodation in Stellenbosch, Varga replied: “You will buy a two-bedroomed apartment very close to the campus, let’s say for R1.5m and you will only rent it out for let’s say R8 000 a month. If you go and borrow R1.5m from the bank, your bond payment will be R15 000.”

So investors hoping to make a quick buck will be out of luck. Investments in Stellenbosch properties for rental to students will need to be long term.
The average turnaround time for selling property obtained by parents with a view to getting a return on their investment is seven years. “Now if you have a child (at university) and the rent you are paying is basically just your rent and you sell that apartment after seven years, you will most probably end up with your capital growth that you’ve earned and that’s paid for your child’s education. That is why parents are still buying”.
Students going to varsity and those leaving annually is tantamount to a constant flow of supply and demand, making this market a lucrative one. What has also happened in many instances is that demand has outstripped the supply due to an increasing number of students enrolling for tertiary education. This has in some cases, certainly in Stellenbosch and Potchefstroom, led to prices skyrocketing.

Varga points out that having, for example, two offspring at varsity at the same time, could set you back R8 000 a month which amounts roughly to an R800 000 bond.

While cities like Potchefstroom have in many ways been able to expand, towns like Stellenbosch are limited because of the surrounding winelands making expansion impossible. These are factors that lead to even higher price hikes in terms of demand and supply.
A ministerial committee on student accommodation recently released a report on the growing need for housing, saying of the 530 000 scholars who registered in the past year or so, universities were only able to provide lodging for 100 000 students or 18% of those who registered.
Dawie de Villiers, chairman of MidCity which services the Gauteng region says student accommodation is turning into a niche market. De Villiers says some developers are entering into partnerships with universities like Tukkies in Pretoria and the University of Johannesburg (UJ) in providing adequate student accommodation.

There also appears to be a move away from the dormitory-like housing of yesteryear making way for so-called student villages comprising suites of three, four or five bedrooms, a kitchen, lounge and ablutions.
De Villiers says while MidCity’s developments comprise suites of between three to five bedrooms, all students have their own rooms. The studios are all fully furnished and equipped. “They just arrive with their bedding and clothes.” This type of accommodation typically costs around R2 500 a month.
Another R300m student village known as the Ekhaya Junction is currently under construction, also in Johannesburg. The project is being undertaken by Junction-S which is a joint venture between Citiq, Jika Properties and Lapalaka Developments.

It services UJ, the University of the Witwatersrand and the Tshwane University of Technology. It’s being financed by Futuregrowth, a division of the Old Mutual Group.
Junction-S director, Cornelius Mokone, says student accommodation is a growing phenomenon due to demand. In many instances traditional residences provided by tertiary institutions in the past had fallen into disrepair and were costly to renovate.
Mokone said many parents had taken it upon themselves to purchase residential units ahead of their children going to varsity with a view to letting them once their offspring had graduated. This has led to prices near these places of learning to skyrocket.
It has also provided developers and investors with an opportunity to invest in a growing market. This phenomenon is not unique to South Africa with developers in the Netherlands, for example, turning to discarded freight containers to create funky student villages.
The Ekhaya Junction is about five kilometres west of the Pretoria CBD and will house 2300 students upon completion at the end of 2014. The village will include free wi-fi, study rooms, convenience stores, eco-friendly water heat pumps, laundry facilities, cleaning and maintenance and 24-hour security.
This is very much in line with similar projects elsewhere in Gauteng. Mokone says similar to a townhouse complex, students will be able to choose between two and six-bed units with communal kitchens and accommodation in both shared and single rooms.
De Villiers says strict rules currently apply and will apply in all of its student facilities. House mothers and fathers are in charge, security is tight and troublemakers will not be tolerated.
In the education hub of Potchefstroom Jaco Faurie of RealNet Properties says student housing, which comprises mainly units in complexes near the North West University which is situated in The Bult precinct, vary in price range with those closer to the place of learning being far more expensive than those on the outskirts of the university.
Faurie says the more luxurious units have been priced at around R18 500m² while the less lavish ones have been evaluated at R14 000m².
He says investors have shown a keen interest in acquiring student accommodation as there is still room for growth: “…an older two-bedroom unit selling for R665 000 will quickly draw tenants a monthly rental of around R5 000. An investor who paid a 20% deposit would thus comfortably cover his bond of about R4 600 per month and the monthly levy of around R350 with his rental income.”
Property and development company, Aengus, says it has a rapidly growing portfolio of student flats in Johannesburg, Durban and Port Elizabeth that is has created largely by refurbishing existing mothballed office blocks. Rentals for Aengus flats range from R1950 to R2500 per student, per month for 10 months of the year.

A higher education ministerial report on student accommodation has called on universities to enter into partnerships with the private sector to address the current shortages in metropolitan areas. Developers and investors are doing exactly that.
The report says there is definitely a gap in the market for safe, secure and affordable student accommodation close to university campuses and other academic precincts.