Mike* owns a two-bedroom, furnished apartment in the heart of Cape Town’s city centre. Real estate agents estimate he could get about R15,000 (US$1,100) a month on a long-term lease. But on the online home-rental platform, Airbnb, he is earning R1,400 (about $100) a day. Of course there are expenses that he needs to cover – including electricity, cleaning, laundry and welcome amenities for each new guest. But it is currently peak season in South Africa’s ‘Mother City’ and his flat is fully booked for the next two months. During this time he will earn over 100% more than he would via a long-term lease – although this will likely change from May as Cape Town enters into its off-peak season.
Liezl Veldtmann, who has been working in Cape Town’s hospitality and short-term rental market for 10 years, says property owners are increasingly becoming aware of the potential for higher rentals through Airbnb. A few years ago she started a side business managing Airbnb listings for a couple of apartments in the area. For a 20% commission she handles everything from bookings, cleaning, guest arrivals and providing welcome supplies such as tea and coffee, chocolates and a bottle of wine. The aim is to allow property owners to benefit from the higher rental rates that Airbnb offers, yet without the burden of overseeing bookings.
“I manage everything. The Airbnb listing is under my name and linked to my profile. Only my details are there… and I am also the first contact if something goes wrong.” One of her clients owns a studio apartment in the city centre, which she estimates earns 30-40% more on Airbnb during peak season than it would if rented out on a year-to-year lease. During off-peak season, however, she drops rates to try and increase occupancy. Nevertheless, Veldtmann believes that the potential for higher rentals through Airbnb has played a role in the rapid residential price increases seen in some of the city’s most sought-after locations.
According to the FNB House Price Index for June 2016, the year-on-year residential price growth rate in Cape Town’s Western Cape Province was 12.1% (although national averages by the end of 2016 suggest this may be slowing). Vanessa Price a rental agent at real estate consultancy Chestertons with 20-years experience in the Cape Town market – notes that her agency has seen an increased interest in buyers looking to invest in properties that they can market on Airbnb. It is not uncommon to see “Airbnb potential” used to market apartments around Cape Town, and buyers often ask whether the building’s body corporate allows short-term rentals. But Price says this is not the main driver of the property price increases witnessed in Cape Town.
“It’s about demand and supply,” she notes, adding that there are too few properties available to address the influx of both local and foreign buyers looking for Cape Town prime real estate. And it is not just the short-term rental market enjoying higher rates. Price says long-term rentals in Cape Town and its surrounds have also risen. For example, in 2007 she rented a studio apartment in the city bowl for R3,700 ($270) per month. Ten years later, that same apartment earns R10,000 ($740) monthly.
While the Airbnb model could be considered a threat to traditional rental agencies such as Chestertons, Price notes that her firm has not seen a fall in demand for its services as not everyone has the risk appetite for Airbnb leasing. “You know what you are getting [when going through] an agent,” she explains. “It is about whether you would rather have a tenant in long term and a guaranteed income every month on your investment.”
Source: How we made it in Africa