De­mand for hol­i­day rentals boosts buy­ing to let on At­lantic seaboard

Weekend Argus (Saturday Edition) - - PROPERTY -

AN IN­CREASE in short-term rental de­mand that far out­strips the 10.5 per­cent growth in prop­erty value along Cape Town’s At­lantic s eaboard means b u y i n g t o l e t h a s be­come an in­creas­ingly vi­able op­tion for in­vestors, says Lew Geffen, chair­man of Lew Geffen Sotheby’s In­ter­na­tional Realty.

“With Cape Town’s ev­er­in­creas­ing pro­file as a lead­ing tourist desti­na­tion as well as the grow­ing mar­ket for travel within the coun­try, or in­deed the city, de­mand for hol­i­day rentals along the At­lantic seaboard is vir­tu­ally guar­an­teed for a good por­tion of the year,” he says.

“This high de­mand has re­sulted in some equally high prices, mak­ing th­ese prop­er­ties as at­trac­tive to in­vestors as they are to hol­i­day­mak­ers.”

In­vest­ing in the area isn’t with­out its po­ten­tial pit­falls, though. Over- ea­ger­ness and poor plan­ning can quickly leave in­vestors in a pre­car­i­ous fi­nan­cial po­si­tion, he says.

“The so­lu­tion lies in cor­rectly gear­ing your bond to en­sure you’re mak­ing a profit through­out the year. If you have to pay in an ex­tra R20 000 or R30 000 a month that you were count­ing on com­ing from a year-round steady stream of short-term lets, you could find yo u r s e l f i n t r o u b l e ve r y quickly.

“This is fur­ther com­pli­cated by the fact that rental prop­erty prices can fluc­tu­ate quite sub- stan­tially in line with the sea­sonal tourist de­mand.”

Rentals on t he At­lantic seaboard dur­ing De­cem­ber and Jan­uary can in­crease by up to 500 per­cent from the lows they sink to be­tween May and Septem­ber.

The At­lantic seaboard finds it­self at the fore­front of this trend due to its pop­u­lar­ity with trav­ellers from over­seas and around the coun­try.

“Camps Bay in par­tic­u­lar is al­most like a ho­tel. Tourists just can’t get enough of it and this is driv­ing prices up and up,” says Geffen.

De­cid­ing whether to let a prop­erty in the long or short term is dif­fi­cult. The re­wards of s hort- t e r m r e ntals are clearly sub­stan­tial, with some prop­er­ties bring­ing in the same amount for a daily rent dur­ing the peak sea­son as they would for a month on a long-term lease. How­ever, this is ob­vi­ously off­set by the large drop in in­come dur­ing the win­ter, with the dis­tinct pos­si­bil­ity of the prop­erty stand­ing empty for weeks at a time.

The sea­sonal price fluc­tu­a­tions af­fect the en­tire spec­trum of prop­erty. A one-bed­roomed flat that is per­ma­nently used for short-term lets can go from R1 000 a night dur­ing win­ter to R4 000 over t he Christ­mas break. At the higher end, a four- bed­roomed lux­ury villa c a n r a nge f r o m R4 5 0 0 t o R30 000 de­pend­ing on the sea­son. There is also a small but grow­ing num­ber of pre­mium prop­er­ties t hat c om­mand rentals of over R100 000 a night.

“Fi­nan­cially se­cure own­ers may be bet­ter able to weather the vari­a­tion than those who are par­tially de­pen­dent on the rental in­come,” says Geffen.

Bren­dan Miller, chief ex­ec­u­tive of Lew Geffen Sotheby’s In­ter­na­tional Realty At­lantic Seaboard, says own­ers should also pay at­ten­tion to the more tax­ing na­ture of short-term rentals. With guests con­stantly com­ing and go­ing, there is an in­creased chance of break­age and gen­eral wear-and-tear.

Also, short- term rentals re­quire sig­nif­i­cant ad­min­is­tra­tion such as mar­ket­ing, man­ag­ing guest turn­around and pay­ment col­lec­tion.

“This is the main rea­son that most own­ers who let prop­er­ties choose to use pro­fes­sional man­age­ment com­pa­nies that can deal with the ad­min­is­tra­tion while they col­lect the prof­its.”

The best way to max­imise your in­come, says Geffen, is to em­ploy dif­fer­ent strate­gies through­out the year.

“Be­tween Oc­to­ber a nd April, ad­ver­tise the prop­erty as a hol­i­day rental. Then, once the tourists go home, grow a list of cor­po­rate clients who can use it as ac­com­mo­da­tion for vis­it­ing ex­ec­u­tives.

“This en­ables you to cap­i­talise on the highly prof­itable tourist de­mand as well as main­tain­ing a rel­a­tively con­stant sup­ply of in­come dur­ing the win­ter,” he says.

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