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Just Property: Exploring profitable student housing investments in Gqeberha and George

22 Jul 2024

Various studies have shown that there are more students than there are beds for them in South Africa. As a result, student housing has become an important growth industry.

Source: Supplied. Mark Connett of Just Property Port Elizabeth Commercial.

Developers have focused on markets like Cape Town and Stellenbosch, and while demand in traditional centres is certainly high, competition has become intense. However, there are two towns that offer potential with significant demand for quality student accommodation: Gqeberha (previously Port Elizabeth) and George.

Both are experiencing rapid student population growth, creating a pressing need for adequate student housing solutions.

There are a number of institutions offering higher learning opportunities in Gqeberha. Among these, Nelson Mandela University (NMU) has seen a notable increase in student numbers.

This growth is a reflection of the university’s expanding academic offerings and its reputation as a leading institution in the Eastern Cape.

NMU’s focus on creating a supportive and resource-rich environment for students, including establishing new transport systems and catering services, highlights the university’s proactive approach to managing this growth. These efforts ensure that students have access to essential services, thereby enhancing their overall university experience.

The broader implications of these developments indicate a sustained increase in student numbers at NMU, which presents significant opportunities for investors in the student housing market in Gqeberha.

However, few know that NMU has a satellite campus in George, situated at the foot of the Outeniqua Mountains in the Southern Cape. This campus focuses on providing education that supports the green economy and sustainable development. It offers a range of programmes primarily in the fields of natural resource management, including forestry, agriculture, nature conservation and game-reserve management.

And George is on the brink of significant educational expansion, which will further drive demand for student housing.

Plans are underway to establish a new university in the town, enhancing George's position as an educational hub. Additionally, George College is planning to expand its campus to accommodate more students and offer a wider range of programs. These expansions will attract more students to the town, increasing the demand for student accommodation and presenting lucrative opportunities for investors.

“The student housing market in Gqeberha and George presents a compelling opportunity,” Mark Connett of Just Property Port Elizabeth Commercial says. “There have been significant changes in recent years, driven by evolving educational needs, policy adjustments and the ever-increasing student population.”

Opportunities for developers and investors

According to a report by Nelson Mandela University (NMU), the shortage of on-campus housing has forced many students to seek off-campus accommodation, which often lacks proper regulation and security, comes at a high cost, and, often, is sub-standard.

Many private landlords took advantage of the high demand, charging exorbitant rents for poorly maintained properties. This has led to significant dissatisfaction among students, who have raised concerns about their safety and the affordability of such accommodations.

The rapid increase in student numbers has exacerbated these issues.

Recognising these challenges, local governments and educational institutions have implemented policies aimed at improving the student housing situation.

In Gqeberha, the municipality has adopted a comprehensive student accommodation policy that outlines standards for safety, affordability and quality of housing with the aim of regulating off-campus accommodation to ensure that students have access to decent living conditions.

The Western Cape Government has conducted extensive studies on the housing market in George to identify gaps and opportunities. These studies have informed policy decisions, investment strategies and zoning regulations aimed at boosting the supply of quality student housing.

Local government has integrated student-housing considerations into its broader urban-development plans. These policies focus on creating safe, affordable, and well-maintained housing options that meet the specific needs of students and encourage the development of purpose-built student accommodation (PBSA) to address the growing demand.

The changes in policies and the persistent demand for student housing present lucrative opportunities for investors in Gqeberha and George:

Purpose-built student accommodation (PBSA): With new policies supporting such developments, investors can benefit from constructing dedicated student-housing complexes that meet regulatory standards and cater specifically to students' needs. These properties can offer amenities such as study areas, recreational facilities, and secure environments, making them attractive to students and their families.

Public-private partnerships: There is also potential for public-private partnerships (PPPs) in the student-housing sector. Local governments and even educational institutions are increasingly open to collaborating with private investors to address the housing shortage. Such collaborations may even come with incentives that ensure long-term profitability.

Renovation and upgrading of existing properties: Of course, the opportunity exists in renovating and upgrading existing properties to meet the new standards set by local policies. Many off-campus accommodations require significant improvements to comply with safety and quality regulations. By investing in the refurbishment of these properties, there is potential to enhance their value and appeal to the student market.

Expansion into emerging markets: While Gqeberha and George are the primary focus of this article, there are emerging markets within the broader region that also present opportunities. Smaller towns and cities with growing educational institutions are experiencing similar housing shortages. Investors can tap into these markets early, establishing a presence and benefiting from the rising demand for student accommodations.

Sustainable and green-housing solutions: With an increasing emphasis on sustainability, as educational institutions fill with GenZ, there is a growing market for eco-friendly student housing. Investors can differentiate their offerings by incorporating green building practices and energy-efficient designs. Such initiatives not only align with global sustainability trends but also appeal to environmentally conscious students and institutions.

Technology integration: Integrating technology into student housing can significantly enhance the living experience and attract tech-savvy students. Smart housing solutions, such as automated lighting, security systems, and high-speed internet, can set properties apart from traditional accommodations. Investors who embrace technological advancements can create innovative living spaces that cater to the modern student's lifestyle.

The student housing market in Gqeberha and George is ripe with opportunities for investors. “Savvy investors willing to venture beyond the more crowded property landscapes of traditional educational strongholds are likely to be well rewarded,” concludes Connett.