Growthpoint, the nation’s largest property company, has unveiled plans to invest 1.2 billion rand (approximately $63 million) into the student housing sector by 2026. This move aims to counterbalance challenges faced in other real estate segments.
A substantial shortage of up to 500,000 beds within South Africa’s formal student housing sector, highlighted in a 2021 International Finance Corporation report, has triggered the interest of prominent real estate firms.
George Muchanya, head of Growthpoint’s Investment Partners unit, highlighted the pressing issue: “It’s a lack of institutional-type of accommodation.” Muchanya explained that Growthpoint seeks to bridge this gap by expanding their student housing presence.
Having initiated a dedicated student housing fund last year, Growthpoint plans to raise bed capacity by over 20%, reaching 8,800 by end of 2024, with further expansion in the subsequent year.
This strategic investment is projected to elevate Growthpoint’s portfolio value to 4 billion rand by 2024, up from 3 billion rand in June. Presently, the company owns 10 student accommodations in vital urban centers, including Johannesburg, Pretoria, and Cape Town.
This decision aligns with a critical period in South Africa’s real estate sector. As remote work reduces office space demand, listed South African real estate, particularly real estate investment trusts (REITs), faces pressure to maintain dividends. Frequent power blackouts necessitate substantial generator investments.
Since the pandemic, investments in South Africa’s benchmark index doubled, while the listed property sector lagged, yielding only 143 rand for every 100 rand invested.
Growthpoint’s foray into student housing not only addresses existing challenges but also positions the company to tap into a high-potential sector. As Growthpoint navigates evolving real estate dynamics, this calculated investment could herald a transformative shift in market trends.
17th August, 2023
Delino Gayweh
Serrari Financial Analyst
photo source Google
