Tenants are in the pound seats as rental rates come down because of the number of units available. But owners are seeking briefer lets, hoping tourists will return by summer
A flood of Airbnb properties has begun to hit the long-term rental market as the travel ban leaves tourism investment property owners without incomes.
Many Airbnb owners are converting their properties to longterm rentals, competing with those already on the market, says Jacqui Savage, national rentals manager for the Rawson Property Group. This movement emerged in February and has continued to grow since the start of the lockdown. Tenants will be spoilt for choice with the introduction of so many new properties to the long-term rental market.
“Landlords will therefore need to adjust their approach to account for current trends,” Savage says. Echoing this, Samuel Seeff, chairman of the Seeff Property Group, says this flood of Airbnb stock into the rental market has resulted in an oversupply in most areas and put downward pressure on rental rates.
There are, however, challenges for Airbnb property owners who have rushed their properties on to the residential rental market. The first is that demand for furnished units is much lower. Savage agrees: “Unfurnished properties remain the most popular choice for tenants, so much so that many Airbnb owners are removing the furniture from their properties… Furnished apartments tend to attract much higher rents than unfurnished and this is an issue when affordability is a concern for tenants – as is currently the case.”
Rents for long-term residential rentals are also lower, Seeff says, adding that the periods needed by residential tenants tend to be at least eight to 12 months.
“Many owners are looking at only six-month rentals, although some are taking an eight-to-12 month option to mitigate some of the risks in the market.” The saving grace for Airbnb property owners is the fact that the travel ban has left many travellers in precarious living situations, especially those who planned to emigrate just before the lockdown started, says Adrian Goslett, chief executive of Re/Max of Southern Africa.
“This has led to new trends in the rental market, with fully-furnished, medium-term rentals becoming increasingly popular…” Elaborating on the trend, Jenny de Necker, broker-owner of Re/Max All Stars operating in Alberton and Germiston in Gauteng, says there has been an increase in demand for fully furnished properties.
“Many of our clients who sold their properties to emigrate and had the sale registered just before or during the lockdown were left stranded. They had all the plans to travel abroad and these where placed on hold when flights were cancelled or postponed.”
To accommodate these travellers and keep their finances ticking over, many Airbnb owners switched to long-term rentals, she says. Agents in the Western Cape and KwaZulu-Natal are also witnessing an influx of Airbnb properties on to the long-term rental market. The Cape Town CBD has a huge over-supply of furnished properties because of the collapse of the shortstay market, notes Craig Watchurst, a Seeff rental agent in the city centre.
“Most seem to be offered for long-term rentals, either furnished or unfurnished, but there are some owners who are hedging their bets and offering the properties for three to six months in the hope that travel and tourism will be back up and running by the summer. Rental rates are falling fast and will continue to do so in the short term.”
Tourism has a massive impact on the Hermanus economy and, as there is a large amount of Airbnb and tourism properties in the town, it has felt the impact of the travel bans across the board, says Seeff’s rental agent in the area Cisca de Vries. “Most of the Airbnb and holiday stock has come on to the residential market.”
But while many tenants relish the opportunity to rent a beautifully furnished home or apartment, longer-term residential tenants usually want to furnish the property with their own furniture and belongings.
“Some property owners are prepared to remove and store their furniture to secure a tenant,” De Vries says. Airbnb stock has also flooded the KZN North Coast residential market. “This is a devastating shock for the hospitality and tourism industry across our region and has a direct and immediate impact on property owners who often rely on high-demand periods to finance running expenses for their properties, says Andreas Wassenaar, licensee for Seeff Zimbali.
The problem, though, is that most of these properties are unfurnished or owners want short leases of only up to six months. On the KZN South Coast, the tourism decline is also being felt by property owners who rely on the holiday market. Jo Giraudeau, Seeff rentals and operations manager there, says most of these properties have come on to the residential market and landlords are willing to charge lower rents.