Experts weigh in on digs for your student offspring

BY BONNY FOURIE bronwyn.fourie@inl.co.za

If you can’t find accommodation for your child, you could buy them a flat. But should you?

BUYING a flat for your student child can be a good investment, as they will always need somewhere to live, but beware if you’re buying for what might be only three or four years.

We are almost halfway through 2022, and for many parents of matrics, attention is turning to university applications and student accommodation.

South Africa has a dire shortage of student accommodation, so if your child is not lucky enough to secure a spot in a residence provided by their chosen institution, they might have to consider renting a private property.

The other option, of course, is that you buy a property specifically for your child to live in while studying.

For parents who are still searching for student accommodation for their children for this year, or preparing to do so for the 2023 academic year, here are some insights from investment property experts:

To rent or buy?

Parents with the financial means to buy a property for their student children may be weighing up the choice of buying or renting.

Interestingly, Shaun Dubois of Just Property says many of today’s landlords started off buying a property for their children and then, when they graduated, kept it and let it to others.

“Often this was the first of many properties they purchased using the equity in the initial property and then some clever gearing to buy multiple properties.” However, Dubois emphasises purchasing is for the more affluent as the cost of tuition is, on its own, beyond most people’s means.

John Birkett of Rawson Properties Claremont says the decision will also depend on how long the student will be studying. If the period of study is short, and the plan is to sell after graduation, then buying might be a risky investment. It would be better to rent, under these circumstances. “If the property is going to be used for a number of years by consecutive siblings or be let, then it is worth buying.

“In recent years, more student parents have opted to rent instead of buy because of campus unrest and, more recently, Covid.”

Location considerations

Whether a student lives in a rental property or one owned by their parents, the same factors need to be considered when choosing an area. The location should offer easy access to campus and attract other students, Birkett says.

Dubois agrees: “The area they buy or rent in should have good transport routes or be close to the campus.”

It should also be safe.

Type of property

While large houses that have been converted into communal student homes have become popular, Dubois reminds parents that this does carry additional costs in the form of maintenance.

“There are benefits, but my advice would be a three-bedroom sectional title unit in a large estate.

This is because larger estates often have better economies of scale as they can pool the levy income and there is often superior security.

Birkett says communal student houses and flats are the most suitable. A cheaper option is renting rooms in shared properties. However, most students opt for studios or one-bedroom flats.

“Properties with modern facilities, such as new kitchens and bathrooms and wi-fi, are most favoured.”

Parents should bear in mind that, when buying, the selected property needs to offer good investment potential. Studios and one-bed apartments carry the least risk and are always sought after.

Should we sell once the property is no longer needed?

This depends on the market, Birkett says. “If there has been good growth over a short term it might be better to call in the investment, but if there has been no growth or a sale might mean a loss of capital, it might be worth renting out until the market

improves or keeping it as a longterm investment.”

Dubois believes it is best to do an unemotional analysis of the property when considering selling or letting it.

“There will be a need to consider the return on investment of the property both in terms of the potential rental but also capital appreciation. As a rule, property is better to keep as a long-term investment but only once the true returns are calculated can an informed decision be made.”

Many courses, however, keep a child at university or college for only three to four years, and if there are no siblings to take over, there could be a worry about whether it is too soon to sell without losing money.

But Dubois says a “good purchase” initially of a property under R1 million, and therefore attracting no transfer duty, could still offer a profit.

“Ideally though, you would want to pick up a property with a below-market offer.”

MOST students opt for studios or one bedroom apartments. PICTURE: MART

PRODUCTION/PEXELS