Advice and Opinion

Cape Town’s summer to see a short-term rental boom, says Seeff

Clifton Bungalow
Clifton bungalows, located almost on the beach, rank amongst the most sought after. This large private north facing bungalow offers direct beach access and your own private pool and deck as well as stunning sea and mountain views. Rates range upwards of R25,000 per day.

The arrival of summer in the city signals endless sunshine, lazy beach days and the time when those patios and pools are put to full use, it is also the time for scores of holiday makers to ascend on the city.

While just about the whole city is a tourist mecca, the Atlantic Seaboard, V&A Waterfront and City Bowl are the prime location for holiday makers. “This”, says Ruth Munitz, manager of SeeffSHORTSTAY, “means that there is a high demand for short-term apartment and villa rentals and it is an excellent time for property owners and investors to capitalize and achieve attractive rental yields”.

Cape Town is now the busiest holiday tourist city in Africa, attracting millions from across the country, continent and globe and now boasts a very busy short-term rental market. According to Munitz, this sector of the market is not just growing, but now contributes notably to the Cape property sector.

“The last tourist season was the busiest on record. Cape Town Tourism reported a hike in visitor arrivals of 8,9% for the 2015 year with more than 4.6 million people visiting the city. More and more people now visit each year, especially over the October to April high season period and we expect this season to be as busy, if not busier than last year”, she adds.

While Airbnb has grown enormously, it caters primarily for the mid-to-lower end of the market. There is however, a thriving top end where villas and apartments are increasingly sought for the flexibility and exclusivity that this home-away-from-home can offer.

For this top end sector, the time and administrative hassle that comes with short-term rentals can be a real challenge, says Munitz. You often have to field an enormous amount of enquiries and shoulder an administrative burden and that is before your visitor has even arrived.

While it may be easy enough to manage the odd rental or visitor through Airbnb, many will tell you that even this can soon be quite a bit of work. When it comes to an apartment or villa, it becomes even more challenging for property owners and investors.

This, she adds, is where the services of a rental agency comes in. The aim is to essentially fill the gap left by Airbnb and other local and international portals by taking the hassles out of the process. This includes managing the property and guest experience and maximizing the rental yield for the property owner or investor.

“There are many hidden costs when it comes to short-term and holiday rentals that will all eat into your profits. If you add the administrative and time burden into the mix, then the opportunity to make some money can quickly loose its sparkle”.

One of the first things that a skilled agency can do is to ensure that the rental is pegged at the correct rate taking into account all relevant aspects to ensure maximum rental returns. There may also be simple things that the home owner can do to increase the marketability and rental returns of the property.

“As a point of departure”, continues Munitz, “we recommend a review of the property to determine the achievable rental rates. Bear in mind that the season is divided into different demand periods. The high season, from mid-November to mid-March tend to achieve the highest rentals while the rate can drop by about 30%-40% outside of the high demand periods”.

Earning a good rental income depends on a number of factors, starting with a good location, preferably close to the beaches, she adds. Views are a big attraction and the better the location, views and finishes, the higher the daily rate that you can achieve.

“Then”, continues Munitz, “there is the guest experience. This becomes especially important for high demand holiday areas such as the Atlantic Seaboard and City Bowl where visitors will relay their experiences online and quite often turn into repeat guests”.

“This is a critical factor for the short-term rentals market”, she adds. “Good reviews drive bookings and, this she says, will also increase the marketability and potential returns of your property”.

“Good basic amenities such as satellite television, Wi-Fi and security are generally now a must for the short-term market. Don’t forget also that your guest will need to know how to operate various aspects of the property that you may not even think of. This includes for example how to reset Netflix, operate the Jacuzzi, what to do when the washing machine does not work and so on. Here too, the rental agency can provide this service along with a concierge service similar to that on offer in guest houses and hotels, all adding to the guest experience and marketability of the property”.

“Aside from the listing, marketing and attracting of visitors and tenants for your property, there is also the ongoing management of the property, looking out for risks of damage, essential maintenance and other aspects”, says Munitz. “Where a home owner only wants to rent the property out for a limited period, there may be the need to arrange packing and storage of personal effects”.

Outside of the busy tourist season, there is also ongoing demand for short-term rentals from business executives, corporate rentals, company relocations and gap rentals where home buyers or owners need temporary accommodation while renovating or waiting to move into their new home.

“All of this”, continues Munitz, “has contributed to a significant rise in the demand for short-term rentals across this prime residential belt. Cape Town Tourism’s research also shows that visitors tend to stay anything from a week to six months while about 30% stay longer. The data also shows that 87% of visitors want to return to the city, all the more reason to focus on providing an excellent property and guest experience”.

“Empty rooms and homes do not earn any money and ongoing booking management to ensure occupancy is another vital value-add that a skilled rental agency offers”, she adds.

Bookings for the season are already in full swing and she says that home owners and investors need to ensure that they list sooner rather than later if they hope to capitalise on what is set to be a busy summer tourist season.

While rental rates can range to well into the upper thousands per day for a top end property in Clifton or Camps Bay, two of the most popular areas, she says that such high rates tend to be few and far between.

“Again, the guidance of a skilled rental agent will ensure that you go to market at the right rental rate to attract occupancy. The better the views and the closer you are to the beach, the better the rates that you can expect”, says Munitz.

As a general guideline, property owners and investors can expect rental income of around R6,000-R8,000 per day over the coming holiday season for a two to three bedroomed home with a view in Camps Bay. Luxury villas can range up to R20,000-R25,000 per day for a home with a swimming pool and fabulous views.

Clifton bungalows and apartments should achieve on average about R23,000-R35,000 per day over the high season period.

City Bowl apartments with two to three bedrooms, preferably with a view, can attract on average around R5,000-R7,000 per day in season while a house with all the latest mod cons, a swimming pool and fabulous city views can achieve as much as R10,000-R20,000 per day.

The peak period between November and end March tend to attract the highest rates. Out of season, the rates tend to drop by about 30%-40%, concludes Munitz.