Now is a great time to buy a rental property located near South African universities struggling to accommodate their students.
In February 2025, reports emerged that UCT students were sleeping in Student Representative Council (SRC) offices or makeshift spaces like lecture halls due to a lack of affordable accommodation. The SRC attributes this crisis to the university administration failing to provide adequate support.
This issue is not isolated. Across South Africa, students are protesting as they struggle to find accommodation—especially those relying on the National Student Financial Aid Scheme (NSFAS) for private housing. Many claim that NSFAS’s online accommodation platform is dysfunctional.
Opportunities for property investors
Despite the crisis, this presents a significant opportunity for property investors with properties near universities. However, some investors hesitate to rent to students due to concerns about NSFAS grant delays or students not maintaining the property well.
If an investor can look past these challenges, there are key advantages:
- Properties close to educational institutions typically yield higher rental returns.
- Demand for student accommodation remains strong, ensuring low vacancy rates.
- Short-term rental options can help bridge gaps during student holidays.
Rental rates in university towns
According to Harcourts Winelands/Atlantic General Manager, Jaco Spies, a bachelor apartment within one kilometer of Stellenbosch University can fetch up to R13,000 per month—largely due to parking challenges. Properties further from campus see a 20-25% drop in rental value.
However, for NSFAS students, accommodation grants can be as low as R3,200 per month. NSFAS claims its rental allowances are comparable to university residence fees, but demand still far exceeds supply. An estimated 250,000 students require accommodation, indicating a critical shortage.
Private rental as a solution
Private landlords can help bridge this gap by offering affordable off-campus housing. Some investors are looking beyond walking distance to universities, where properties may be more affordable while still meeting basic student accommodation standards.
Options for student accommodation investments:
- Converting unused office spaces into student housing.
- Investing in shared student housing—which may raise concerns over noise and property maintenance but can be managed with strict rules.
- Buying turnkey properties near universities to attract NSFAS-funded tenants.
Growthpoint's R800-million investment
One company addressing the student housing shortage is Thrive Student Living, which has launched a massive R800-million student accommodation project adjacent to the Howard College Campus at the University of KwaZulu-Natal. The development, led by Growthpoint Properties, will add 2,400 student beds by January 2027.
Growthpoint is also finalizing two additional projects for the 2025 academic year:
- Thrive @ Crescent Studios (900 beds, Braamfontein, R300 million).
- Thrive @ Arteria Parktown (500 beds, Parktown, R200 million).
These investments demonstrate the strong returns available in student housing, with rental yields ranging from 6% to 12%—or higher, depending on supply and demand.
Key considerations for investors
To ensure student rental investments remain profitable, landlords should:
- Set rent prices that are affordable but still yield strong returns.
- Decide whether to invest in renovations to attract tenants or opt for a new build.
- Factor in vacancy periods—some student rentals sit empty in December and January.
- Consider short-term rental options for holidaymakers during student breaks.
- Perform regular property inspections—entry, mid-lease, and exit inspections help protect investments.
- Use a rental agency with experience in student accommodation to manage leases and tenant relations.
Final thoughts
With student accommodation in crisis, investors have a unique opportunity to provide much-needed housing while securing high rental returns. Whether through private rentals, commercial student housing, or shared accommodation models, the demand is evident. As major developers like Growthpoint invest in this sector, smaller investors can follow suit by carefully structuring their student rental investments.
