Before spending money to attract visitors for short-term lets, make sure the city's regulations allow you to offer your property
The holidays are upon us, and the Mother City is braced for an influx of local and international visitors.
Visitors are paying premium rental prices to enjoy the beaches and cosmopolitan lifestyle the Mother City offers, says Pam Golding Properties, with homes along the Atlantic Seaboard fetching astounding daily rents.
Dexter Leite, PGP’s rental manager for the Cape region, says many travellers are repeat visitors who spend their holidays in Cape Town. With demand about to peak, PGP has already let a beachfront bungalow in Clifton for R23000 a day and a villa in Bakoven for R30000 a day.
Figures for the first quarter of this year indicate the popularity of the Mother City as a holiday destination. South African Tourism figures show that from January to March there were 472156 foreign tourist arrivals, a 6% increase from the same time last year. This means a foreign direct spend of R5.7billion, a 1.2% increase for the same period last year.
The Western Cape came out tops for the number of formal bed nights, reaching 3.3million, an 18.3% increase from the first quarter of 2016. It was also tops for the average length of stay, with tourists spending an average of 12 nights.
A breakdown of international visitors showed:
35.3% of all African tourists arriving in the country by air visited the Cape.
39.7% of all tourists from Asia and Australia visited the Cape.
60% of all tourists from the Americas chose the Western Cape.
61.7% of all European tourists came to the Western Cape.
All in all, the Western Cape accounted for 30% of South Africa’s tourist spend during the period.
Cape Town’s popularity as a world-class tourist destination has resulted in a spike in the number of homes available for holiday lets and fuelled investor demand for sectional title units with short-term rental potential. But prospective landlords hoping for solid returns must do more than splash on paint and buy new furniture. To successfully capitalise on the market, landlords must be thoroughly prepared.
Lara Colananni, conveyancing attorney at Guthrie Colananni Attorneys, says foreign and local visitors are spoilt for accommodation choices, so a low-cost renovation and listing on a website isn’t likely to make tourists queue at your door. Landlords must be savvy with their marketing, service and quality of offering, and have a clear understanding of current by-laws, consumer regulations and the pitfalls that can arise.
They must ensure their terms and conditions are comprehensive and take into consideration all eventualities that might leave their businesses exposed to disputes and financial damage.
“People often neglect to update home insurance when circumstances change. Whether you are renovating your home or renting it to strangers, your policy must be adjusted accordingly or you could find yourself in financial trouble.”
Landlords must ensure they are compliant with city regulations. Cape Town is the only metro with by-laws regulating short-term lets, but they were not routinely enforced until now.
Several regulatory bodies influence this industry. The city’s Land Use management department oversees zoning of properties.
Brett Herron, mayoral committee member for transport and urban development, says holiday letting in apartment blocks is not automatically permitted. You need consent from the city, and the property must have the applicable zoning.
The next issue is largely one of definition because the by-laws that regulate businesses such as guest houses and B&Bs were determined by the nature of services they offer – essentially similar to that of hotels, but on a more intimate scale.
Because they generally provide at least one meal and housekeeping, often accompanied by in-room mini-bars with snacks and drinks, they are bound by regulations from health codes to fire and emergency regulations.
Conditions include that the owner must live on the property, that no more than three rooms are let to no more than six people and for each room that is let, a parking bay must be available on the property. If these conditions are not met, the landlord must get departures or consents from the City of Cape Town.
However, in most cases, properties let on portals like Airbnb offer accommodation that, one could argue, are not unlike standard residential rentals, but with very short lease periods.
Colananni says: “This method of letting accommodation is a modern phenomenon that differs considerably from traditional options. Like many other aspects of the digital age, it’s not simple or quick for legislation to keep up with rapid change in global trends. When the local regulatory framework was being drafted for the small-scale tourist accommodation sector, portals such as Airbnb weren’t on the radar.”
The City of Cape Town recently signed a landmark “collaborative tourism” agreement with Airbnb, the hospitality platform’s first alliance of its kind with an African city.
Lew Geffen, chair of Lew Geffen Sotheby’s International Realty, says the nature of online letting portals that makes them convenient also makes them susceptible to criminal abuse.
“Our Sea Point office was recently contacted by an irate tour guide who was outside an apartment she had booked and paid for online, waiting for keys to be dropped off. But we don’t do short-term letting and the property she said she had booked was listed for sale on our website. It was definitely not for rent.
“Someone copied photos from our website and posted them on an online holiday booking site. The tour operator lost her clients’ money and they had nowhere to stay.”
His advice to landlords is to do a compliance check with the council rather than wait for the city to come to them, and for potential holidaymakers to do their homework before laying out a substantial sum.
“Cape Town is one of the most desirable global tourist destinations and top accommodation commands top dollar – in the past year reportedly more than R750milllion for Airbnb-style accommodation alone.
“Unless you intend to live on the property or can afford to run a second home and leave it unoccupied for 11 months of the year, make sure you’re permitted to let to tourists before you fork out a cent.”