The state of the buy-to-let property market in South Africa offers homeowners and investors a few opportunities to maximise returns. Picture: RDNE Stock project/Pexels
South Africa’s buy-to-let property market is currently a haven of opportunity for investors, even if you are brand new to this wealth creation method or even just an ordinary homeowner looking for some extra income.
With international tourist arrivals figures rising and demand for student accommodation continually soaring, property investors are in a good position to take advantage of the impacts of these two factors on the rental market, says Paul Stevens, chief executive of Just Property.
“South Africa’s real estate sector has been receiving increasing attention, especially in the buy-to-let market. With the continent’s breathtaking landscapes, vibrant cities, and burgeoning opportunities, there’s no better time to invest in property.”
Buy-to-let property investment offers two lucrative avenues for maximising returns – short-term lets to tourists and longer-term lets to students and young people.
Stevens unpacks both options:
1. Short-term lets: Airbnb opportunities
Citing recent figures released by the Western Cape’s tourism, trade, and investment promotion agency, Wesgro, he says there has been an uptick in tourism arrivals, particularly in the Western Cape.
“International two-way passengers remained strong between January and June 2023, reaching 1,4 million, exceeding pre-pandemic levels by 104 percent and growing by 76 percent year-on-year.”
The 2022/2023 season also welcomed double the number of ship calls when compared to the last complete season.
This scenario therefore offers embattled South African homeowners an opportunity to make extra income by listing their properties on platforms like Airbnb, or buying properties for the purpose of renting them to tourists, Stevens says.
The short-let market is flourishing with tourists keen on immersing themselves in local experiences and preferring homely accommodation over traditional hotels.
“For property owners, this presents a win-win situation. Not only can they earn a substantial income from short-term lets, but they also keep their properties well-maintained and ready for use whenever they wish.”
By investing in sought-after areas and listing on platforms like Airbnb, homeowners can earn impressive returns, leveraging the consistent influx of tourists to the Rainbow Nation.
He says various reports from January to September last year show that newly registered Airbnb hosts in South Africa earned more than R115m.
“The current property landscape can be described as a buyers’ market, so there are good investments to be had. Now is a good time to get in touch with a property professional who can advise you and help you find the perfect house or apartment that will allow you to take advantage of the influx of travellers during our summer season.”
In January 2023, the Department of Higher Education and Training noted a shortage of 400,000 student beds in South Africa, and Stevens says this “clearly represents: another investment opportunity. Developers from small-scale property investors – including YouTuber Caspar Lee, to South Africa’s largest property company Growthpoint, are filling some of the gaps.
“While TVET and rural colleges are hardest hit, there is also a scarcity of safe, affordable, and convenient accommodation in university towns like Cape Town, Stellenbosch, and others that have seen a rise in the student population.”
But it’s not only students who are struggling to find accommodation as there is a “glaring lack” of rental properties available to young professionals, especially in areas close to employment hubs.
“This presents an unmissable opportunity for property investors.”
With tertiary institutions attracting both local and international students, Stevens says there is a constant demand for accommodation. Plus, young professionals starting their careers in urban hubs need convenient places to stay.
Unlike short-term lets that might face seasonal variations, longer-term lets to students and professionals ensure a consistent rental income, often secured by a year-long contract. And a bonus is that, as demand surges and supply lags, properties in university towns and urban centres are likely to appreciate in value over time.
“Students and young professionals seek convenience, safety, and connectivity. Properties that cater to these needs will always be in demand.”
To capitalise on this opportunity, he says property owners should:
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