November 13 2024 09:15
This is a guest article by Grant Smee of Only Realty Property Group
Grant Smee
Airbnb continues to drive high levels of short-term letting activity across the globe. Over the period of 10-years, the popular app has increased its active listings from 550,000 to a 7.7-million in the world. Its 2023 financial report also cited year-on-year growth of 15.9%, achieving $73.25bn in gross booking values.
While 68% of international respondents in a 2023 Savanta-run survey would still prefer a hotel stay, Airbnb has played a pivotal role in shaping South Africa’s short-term rental market.
According to data, “Airbnbs” in Cape Town alone welcomed 700,000 guests in 2023, contributing R14.4bn to the GDP and supporting 42,000 jobs. There are 23,000-plus listings in the City of Cape Town alone.
Today, Cape Town has more active Airbnb listings than San Francisco, Amsterdam, Berlin and Sydney.
With a housing crisis firmly in focus, cities like Barcelona have announced plans to ban Airbnb by 2028 and popular cities like New York also implemented stricter regulations to limit activity.
Government to Clamp Down on Short-Term Letting
As the local short-term letting craze continues, the South African government have announced plans to regulate Airbnb and other short-term rental platforms with the aim of balancing the needs of tourism, housing and the local communities.
The South African Department of Tourism is advancing plans to regulate short-term rental platforms like Airbnb. The policy, currently in its final stages, proposes setting thresholds on Airbnb listings to better manage the market’s impact on housing availability and affordability, particularly in tourist-heavy cities like Cape Town.
The proposed framework would empower the Minister of Tourism to limit the number of days a property can be rented through platforms like Airbnb.
This regulatory move aligns with similar global efforts to balance tourism growth with the needs of local residents and addresses growing concerns around housing affordability and availability, the impact on traditional hospitality, regulatory and tax concerns, safety and job security.
What Government Restrictions Could Mean for Short-Term Letting Owners
With a succession of interest rate cuts underway, now is the ideal time for investors to purchase short-term letting properties. However, uncertainty around the new legislation is bound to have an effect on the market.
he potential road blocks are as follows:
- Income Impact: Stricter limits on the number of rental days per year or restrictions in certain areas would reduce the overall income potential for short-term rental property owners. Those who depend on this income as a primary or supplementary source could see a notable financial effect.
- Increased Operational Costs: New regulations may require owners to obtain licenses, comply with zoning laws and adhere to safety and health standards. Meeting these requirements may involve added expenses such as application fees, property upgrades, or inspections which would cut into profit margins.
- More Competition: Smee adds that if restrictions are implemented to limit the number of rental days, owners may face greater competition during high-demand periods. This could lead to higher vacancy rates in off-peak seasons and might affect the pricing structure as more owners compete for guests within the limited available rental periods.
- Shift to Long-Term Rentals: For some owners, stricter short-term letting restrictions may make long-term rentals more appealing or necessary. While long-term leases offer more stable income, they may generate less revenue than short-term rentals – especially in popular tourist areas.
- Property Devaluation: In regions where short-term rentals are a primary driver of property values, restrictions could lead to a decrease in demand, potentially impacting property prices.
Imposed restrictions could help to reduce noise, crowding and housing shortages. In areas like Cape Town where prices are skyrocketing, some restrictions may be welcomed by locals as they look to get a foot on the property ladder particularly with more interest rate cuts forecast.
247@propertyflash.co.za
