More than just a dorm: key factors to consider before investing in student housing

Student accommodation remains an attractive property investment option, largely due to growing demand for private housing. 

In high-demand towns, buy-to-let investments offer steady rental yields and solid capital appreciation, says Stephan Potgieter, CEO of BetterHome Group Mortgage Origination and BetterBond.

“It may seem premature but given that the country is short of at least 500 000 student beds, it’s never too soon to consider investing in a suitable property either for your own child or as a savvy buy-to-let investment.”  

He says that from Cape Town to Johannesburg and smaller university towns across the country, demand for student housing continues to exceed supply. 

In Braamfontein, for example, strong demand makes it possible for investors to achieve rental yields of up to 16%, according to property reports.

African Investor reports that the gross yield of studios and one-bedroom apartments near Stellenbosch University is around 7.5%.

Well-located properties close to campus typically have low vacancy rates when priced correctly and leased in line with the academic year, adds Potgieter.

While sustained demand makes student accommodation appealing, investors should consider several key factors before committing. 

Affordability assessment 

As with any property purchase, investors should carefully assess affordability by calculating all associated costs, including bond repayments, levies, rates and taxes, maintenance and potential vacancy periods.

“Getting pre-approved for a bond will help an investor make a sound financial decision and signal serious intent to a seller,” says Potgieter.

Pre-approval also provides clarity on monthly repayments and helps investors budget realistically for additional expenses such as levies and ongoing maintenance. 

Demand is seasonal

Demand for student accommodation is seasonal, with the period between September and February being the prime window for securing tenants and finalising leases.

“Property owners should factor into their calculations that the property may be unoccupied from November, when exams finish, to February when students return to campus,” adds Potgieter.

This could mean three to four months without rental income. One option is to lease the property as a short-term holiday rental during this period to help offset the income gap. 

Location as the key

Properties close to campus or along safe transport routes tend to sell and rent more quickly. “Students prioritise convenience. They want to walk to lectures and social activities,” says Potgieter.

Safety is also a major consideration. Properties in well-lit, established neighbourhoods are particularly sought after, as parents place a premium on security. Even a property located one or two kilometres further from campus may remain vacant for longer or demand a less competitive rental. 

Amenities boost value

Apartments within developments that offer amenities such as laundry facilities, gyms or nearby retail outlets are said to be particularly attractive to students.

“Fast fibre connectivity is non-negotiable for student tenants, and secure complexes are especially popular with those living far from home,” he says. 

Other desirable features include off-street parking, reliable uncapped Wi-Fi and backup power solutions such as solar panels or inverters to mitigate the effects of electricity disruptions. 

Funding considerations

Beyond location and amenities, funding structures also play an important role. With more than 600 000 South African students relying on funding from the National Student Financial Aid Scheme (NSFAS), some tenants may depend on a housing allowance to pay for accommodation. However, students can only access this allowance if the property is accredited by NSFAS.

“While the benefit of accreditation is that demand is high and vacancies are unlikely, investors should be aware that NSFAS-funded students carry a different risk profile from privately funded tenants,” notes Potgieter. 

He says there may be payment delays, particularly during registration periods when verification issues hold up disbursements.

This could create a short-term cash-flow gap at the start of a lease. In addition, NSFAS sets maximum accommodation allowances per region, effectively placing a rental cap on accredited properties. This may not work for apartments in more upmarket residential developments, Potgieter says. 

Earlier this month, NSFAS said that it has initiated a national audit of student accommodation accreditation, which will take place throughout this year. 

The bursary scheme said for the 2026 academic year, it has introduced additional controls and measures to ensure robust processes for the registration, onboarding, and placement of students in accredited accommodation, as well as accurate and timely disbursements to accommodation providers. 

It added that placement for 2026 have by and large, been smooth and stable.

“NSFAS is resolute in ensuring that any student, accommodation provider, service provider, or staff member found to have defrauded NSFAS, and by extension the state, is held accountable, with appropriate consequence management measures implemented.”

It added that it is further committed to working collaboratively with all stakeholders, including higher education institutions, housing associations, student bodies, civil society organisations, and the Department of Higher Education and Training (DHET) – to address both the short-term and long-term structural challenges in the student accommodation sector. 

High maintenance demands

While high occupancy rates and steady interest are among the advantages of investing in student accommodation, these properties often require additional upkeep.

“Because of increased usage and annual tenant turnover, student properties may require more frequent maintenance and repairs,” says Potgieter.

“Where units are shared by multiple tenants, bathroom and kitchen fittings may experience heavier wear.”

These additional costs should be factored into affordability calculations when applying for a bond and assessing long-term returns. 

Near campus property appeal

Parents investing in student property should also think beyond their children’s academic needs. Properties in well-managed, conveniently located developments are likely to attract strong resale interest.

It is also worth remembering that students are not the only tenants seeking accommodation close to campuses and places of learning.

Lecturers, administrative staff and post-doctoral researchers working in university towns may represent a steady rental market, supporting long-term demand.

“With demand for student accommodation continuing to outpace supply in many university towns across the country, well-considered investments can offer attractive yields and meaningful long-term capital growth,” Potgieter says.

Independent Media Property