When you think of Stellenbosch, the first thing that comes to mind is wine or wine farms, secondly, are students. Stellenbosch accommodates one of the largest Universities in the country, and many young school graduates flock to this town to commence their tertiary education journey.

Let’s take a moment to understand and appreciate the gem, which is Stellenbosch. Situated roughly 50km east of Cape Town’s metropolitan area in the Cape winelands, it is the second oldest European settlement in the province. The town has become known as the City of Oaks due to the many oak trees that were planted by the town’s founder, Simon van der Stel. Van der Stel, who was the Governor of the Cape Colony at the time, founded Stellenbosch in 1679 and named it after himself.

Huguenot refugees settled in Stellenbosch during 1690, planting grapes in the area’s fertile valleys. Not long after this, wine production began and Stellenbosch soon became the centre of the South African wine industry.

While the first school was opened in the area in 1683, it was in 1859 when the first seminary for the Dutch Reformed Church opened, that more focus was placed on education. Rhenish Girls’ High School was established in 1860 and is now the oldest school for girls in the country.

Victoria College was the first of the higher learning institutions to be established in the area during 1874, with the University of Stellenbosch (“Maties”) following in 1918. Today the university caters to over 30 000 students.

Current Property Market
A student lifestyle, a country lifestyle, a lifestyle away from Gauteng, whichever lifestyle, Stellenbosch caters to all, including the older generation who are very active in the full title property market. A large percentage of Stellenbosch house sales are also to buyers from Gauteng, seeking a safer and more relaxed lifestyle.

Of the property in Stellenbosch, in excess of 80% consist of sectional title units, while the remaining consists of full title property. This would explain why sectional title units outsell full title homes by around 10 to one.

With over 30 000 students attending the University of Stellenbosch, the 24 university residences which can accommodate just over 5 000 students, leaves a significant shortfall. Most students also prefer the freedom and independence of private accommodation, whether that’s an apartment, a student house, or a granny flat attached to an established home.

It has also been pointed out by agents, that property purchases in Stellenbosch are not for students only, but also by families who want the country lifestyle on a permanent daily basis. There were 600 – 700 sales recorded in the Stellenbosch area, in 2015.

Student Accommodation
As with any student town, there is a growing need for student accommodation, with the number of students applying to study at Stellenbosch University growing rapidly. The increase in enrolment has a drastic effect on the property rental market, with the tenant staying on average for three to five years in the area, depending not only on the length of the degree, but the number of degrees completed, or the delay in completing such due to parties being attended.

Student property is a long term income generator and there is guaranteed rental income in all of the best student towns and a constant and growing supply of tenants. Student property is a relatively stress-free investment as long as there is a rental agent managing your property.

Buy-to-let markets in towns like Stellenbosch, Grahamstown and Potchefstroom have revealed profitable opportunities in investing in student accommodation. Industry players say the rising number of university students who need to be housed in privately owned accommodation off campus, has created attractive buy-to-let opportunities for investors. It appears that the housing slump has bypassed university towns like Stellenbosch, Grahamstown and Potchefstroom on the back of strong growth in demand for rental stock.

Convenient access to the university and a desire for security, have a big effect on students’ and parents’ accommodation choices, which are on the top of the list. Areas within walking distance of campus tend to be the most popular for students, because parking on campus is always quite scarce, so students prefer to avoid taking their cars to class. This trend has had quite an effect on property prices, and things get a lot pricier the closer to campus you get.

Stellenbosch has one of the lowest crime rates in the country and for students who are often living away from home for the very first time, feeling secure is of the utmost importance. This makes apartments quite popular, especially with younger students, but well-secured granny flats and houses also suffice. Most of the roads leading to campus are patrolled by campus security, so getting to and from class is not a concern.

Local agents say that parents who buy apartments for their children studying at Maties, are still a major force in the market and there are also independent investors investing in buy-to-let student accommodation. Depending on location, amenities, security and finishes, bachelor apartments close to campus sell at around R800 000 to R1.5m, and 2 bedroom apartments sell at around R1 200 000 to R2m, although there are a few which sell in excess of R2m. Bachelor and 2 bedroom units further away from campus, sell at reduced figures, being around R500 000 to R900 000, as these areas are not ideal for walking to and from class, thereby reducing the demand therefore.

Parents of students usually buy properties between August and September, while investors get in on the action between January and February. Agents in the area confirmed that the asking prices of properties are normally achieved, and in some cases where there is high demand for property primarily due to location, even higher offers are made by purchasers in order to secure the transaction. Purchasers are generally able to negotiate down slightly on the asking prices of properties located further away from the university.

With this in mind, investors in the buy-to-let market, can expect a 7% return on their investment. A 10% escalation per annum is easily achievable, the closer the property is to campus. The further away the property, a lower escalation is more likely, where it can be between 5 – 10% per annum.

Sewerage Infrastructure
Due to the high demand for student accommodation, the development of such has put a strain on the sewerage infrastructure, to such a point that minimal new developments are receiving the go-ahead from the Local Municipality. The sewerage infrastructure needs to be upgraded before the construction of new developments can take place and the upgrades are said to commence this year with completion to be around December 2018. That said, there are a few new developments currently going up, as these were approved before the infrastructure ‘collapse’ and we have also been informed by agents that wood factories which have closed down in the area, are being redeveloped to student accommodation.

Conclusion
With the choke on new student accommodation developments and the 2018 sewerage upgrade deadline nearby, the demand for student accommodation still outweighs the supply, making it an excellent buy-to-let property market. Will an increase in developments after 2018, cause an increase in the supply of student accommodation, to an extent, that the current excellent growth sees a slowdown in sectional title property values and rentals? Time will tell, but its most likely that the Local Municipality will keep this under bay.

Even though Stellenbosch is seen as a student town, agents in the area confirmed that after buy-to-let investors and parents purchasing sectional title property, are sales of full title property to purchasers moving to Stellenbosch for the country lifestyle. No matter which angle you approach it from, Stellenbosch is the place to be, whether you are a student, an investor or a family settling down.

Valuetec provides professional and independent property valuations in Stellenbosch, so put your mind at ease and contact us today, whether you require a valuation to assist you in negotiations for the purchase or sale of student accommodation for your child, a buy-to-let property for investment purposes, or a country lifestyle full title property.