In a scramble to find untapped markets, landlords have hit on the idea of accommodating university students. Dogged by a reputation for grubby living and rowdy drinking, students have typically been avoided as particularly high-risk tenants. Some say that these developers are mad, but maybe they are just onto a fresh new source of demand.

Cape Town developers New Property Ventures have brought onto the market an upscale residential complex in Claremont, called The Sphere, which is aimed solely at students. The 90 semi furnished and serviced apartments are being sold on a sectional title basis. Chairman Chris Drummond says the young, professional buyer market in Cape Town is over traded, which is why they have opted for the student niche. But he adds that careful research was done to target supply accurately.

"We found that when freehold ownership was attached to student accommodation, students had a high desire to maintain their place - with the result that rowdy behaviour and disrespect for property largely evaporated," he says.

Drummond says a proviso of occupation is that during term time, residents must be in full-time tertiary education. "But parents or friends can rent the units during holidays, or use them for their own vacation time."

The cheapest 31 m² studio apartment costs R450,000. For parents wishing to splash out on their varsity-going children, a 104 m², three-bed unit costs R999,000. Though these prices would make most poverty-stricken students gasp, they are reasonable for Cape Town's southern suburbs.

Further north, Johannesburg developers Southnet have completed three townhouse complexes aimed at students: Fairview Village close to Tukkies in Pretoria; Roodeberg Village in Potchefstroom; and Laborie Village in Auckland Park, near both Wits and the new University of Johannesburg (formerly RAU, now amalgamated with Technikon Witwatersrand).

"Laborie Village was aimed at students from RAU and Wits, but a large proportion of tenants are young professionals working at the SABC or nearby newspapers," says MD Francois Roos.

Of the 314 units at Laborie Village, 245 are bachelor flats and 69 two-bed units. All the units sold out in two weeks in December and Roos says between 80% and 90% were bought by buy-to-let investors. "Some were parents of students ," he says.

Bachelor pads sold for R195,000 and two-bed flats for R329,000. Roos reports that some bachelor flats have been re sold for as much as R250,000.

Renting is a good second option to buying. Laborie Village rentals range from R2,000 for a bachelor flat to about R3,200 for a two-bed-unit. "Where students are tenants, landlords must sign leases with their parents," adds Roos.

There are less upscale rental options available for students, though prices aren't necessarily that much lower.

Property managers may feel that student behaviour is a nightmare to control, but Roos says that involving students in the management of the complex works wonders.

Drummond says buyers can evaluate property prices relative to renting . Holiday rentals can also be factored in.

"Investors and parents evaluate the returns on a capital sum residual basis - that is, the value of the unit once the student has left," he says.
 
Financial Mail