There are many benefits when an area becomes popular with travellers
Gauteng’s status as one of the country’s main tourist markets holds knock-on benefits for its residential property market as tourism contributes not only to increased property values but also a more vibrant lifestyle for residents.
Since the global introduction of integrated and mixed-use precincts in recent decades there has been a noted correlation between the tourism and real estate markets, with tourism developments giving rise to infrastructure upgrades, increased appeal for holiday homes, and attraction of foreign buyers.
Increased prominence of such precincts and their neighbouring suburbs also generates demand for property, resulting in higher values.
The news that Joburg was the most popular destination city in Africa last year, with 4.57 million international overnight visitors, according to the Mastercard Global Destination Cities Index, will mean more positive spin-offs for its homeowners and residents.
“Tourism brings investment, especially foreign investment which, in turn, benefits a whole value chain,” says Seeff Property Group chairman Samuel Seeff.
“People investing in run-down property and areas brings infrastructure development which then brings work for architects, decorators, construction, and, in the end, jobs and economic growth.”
The World Travel and Tourism Council reports that the total travel and tourism contribution to South Africa’s gross domestic product (GDP) is predicted to grow by 2.5% this year from last year’s R402.2billion. In 2027 this increase will be 4.2%, taking the contribution to GDP to R624.2bn and accounting for 11.5% of the GDP.
The council’s 2017 report also says that in 2016, the total contribution of travel and tourism to employment in the country, including jobs indirectly supported by the industry, was 9.8% of total employment, translating to more than 1.5million jobs.
“This is expected to rise by 6.7% in 2017 to 1636500 jobs and rise by 4.2% per annum to 2459000 jobs in 2027 – 13.2% of total.”
In addition to tourism boosting the economy and driving small business growth, Seeff says increased tourist numbers also increase the demand for property.
Gauteng areas that have seen growth often linked to tourism development include Pretoria East, due to the Menlyn Maine area development, and the Maboneng and Melrose Arch precincts in Joburg, he says.
Melrose Arch is also a “great example” of a mixed-use development which attracts tourist activity, says Nicholas Stopforth, head of development at Amdec Property.
“Commercial tourism property development can have a great impact on the surrounding areas, even more so if it’s a mixed-use development. With mixed-use developments, you see hotels, residential units, restaurants and retail space all in one walkable precinct.”
The Melrose Arch precinct houses African Pride and Fire & Ice hotels. Two additional Marriott hotels are under construction.
“This means more restaurants and bars for locals. It also means jobs for people working in the hotel and restaurants.”
Regarding property values, Stopforth says Melrose Arch residents paid R14000/m2 in 2009, but today that same space costs around R50000/m2.
“Tourism contributes up to a tenth of the country’s GDP, so the more we cater for tourists, both domestic and local, the more growth we will see.
“Having residential property close to a thriving tourism hot spot is not only valuable for safety, but also a good investment.
“Based on our experience with Melrose Arch, we can safely say living in a precinct with hotels and restaurants is of great benefit to residents. It means they can access great restaurants and bars outside their doors.”
Stopforth admits “things can get busy” in a tourist hot spot, but when balancing positives and negatives for those living in and near them, the positives “far outweigh” the negatives.
Agreeing that some residents may dislike the increase in numbers of people near their homes and increased vehicle traffic, Tshifhiwa Tshivhengwa, chief executive of the Federated Hospitality Association of South Africa, believes living near vibrant tourism precincts gives residents more to do, such as “enjoying restaurants and meeting new people”.
The development of hotels has a positive impact on property values in nearby areas as it shows big companies have confidence in the area.
“Hotel development also brings night life in the form of bar areas for guests and local communities. In some cases, new hotels also come with other developments like roads, improved sewage systems and bulk water supply,” Tshivhengwa says.
But it is the increase in home values that is the greatest positive for residents living near tourism precincts, he says.
Jason Shaw, national sales manager at Pam Golding Properties, says tourism creates a larger pool of foreign buyers by creating a greater awareness of the country as an investment and lifestyle destination.
Although Joburg is not as popular with tourists as regions like the Atlantic seaboard, it still has a highly active tourism industry and a number of popular tourist destinations, says Rupert Finnemore, Pam Golding Properties’ regional head in Gauteng.
“Centres such Sandton, Rosebank, Maboneng in Joburg, Soweto and trendy suburbs such as Melville are popular tourist destinations.
“The growth of centres such as Sandton, and the development of quality accommodation facilities, has been encouraged to some degree by visitors and tourism to the city. The development of such centres can assist in supporting neighbouring residential property markets.”
Residents living near popular tourist destinations are generally positively disposed to them as tourism tends to stimulate local areas and may offer economic opportunities, Finnemore says.
They may even benefit from improved infrastructure developed in response to tourism.
“Tourists tend to add a cosmopolitan feel to areas such as Melville and are generally welcomed. Some residents have also been able to take advantage of tourism by developing bed and breakfast facilities, Airbnbs, restaurants or a retail outlet.”