Despite the local hospitality sector gearing up for a bumper post-Covid festive season, industry players in coastal resorts are reporting a slower-than-expected uptake of short-term lets.
It seems higher interest rates and soaring living costs are to blame, forcing many South Africans to put December holiday plans on hold and opt for a “staycation” instead.
Richard Arderne, Pam Golding Properties (PGP) area principal in St Francis Bay, says rental booking volumes in the upscale Eastern Cape coastal enclave are down, with more availability over Christmas than in previous years.
He believes holiday homeowners have pushed their rates too high, “which is why some stock is still sitting [unbooked]”.
Asking rentals for four- to five-bedroom homes in the village average about R6,000 a night, while canal-front homes with all the bells and whistles go for R10,000 or more.
A similar scenario is playing out in the garden route town of Hartenbos, which is usually chock-a-block over the December-January school holidays. Instead, it’s been “extremely quiet, with few inquiries”, says Lew Geffen Sotheby’s International’s Lezanne Schutte.
Festive season rates in Hartenbos average R3,000-R4,000 a night. “Unfortunately owners aren’t willing to adjust their prices for now,” says Schutte.
Compounding the situation is that holidaymakers who have booked are generally taking shorter breaks, with the 10-day period from December 23 to January 3 most in demand.
In Knysna, near Plettenberg Bay, uptake of holiday lets has also been slower than last year. Margie Smalberger, rental manager for Lew Geffen Sotheby’s International Realty in Knysna, says her company’s rental listings are only 75% booked. And a number of properties are still available over Christmas, at R2,500-R7,000 a night.
It’s also concerning that there’s been an increase in available stock despite an apparent decrease in the size of the short-term rental pool across the Western Cape.
Nadine van Zyl, from Lew Geffen Sotheby’s International Realty in Sedgefield, says the short-term rental market along the garden route was booming pre-Covid. But there have been noticeable shifts since the onset of the pandemic.
Many homeowners are now opting to rent their properties out on a long-term basis on the back of rising demand fuelled by semigration. “Long-term rental demand is through the roof here,” says Van Zyl.
The remote working trend has also allowed a number of holiday homeowners to relocate to the area permanently, so those properties are no longer available for short-term lets, she notes.
PGP has seen a similar surge in uptake of long-term rentals on the garden route. Gordon Shutte, area principal in Plett and Knysna, says: “We have no stock available for long-term rentals — [they’re] all booked out.’’
Shutte does still have short-term holiday lets available across a broad price spectrum — from R2,500-R18,000 a day.
Affordability constraints are also weighing on rentals on the north coast of KwaZulu-Natal (KZN). In Ballito, for example, holiday homes are remaining on the market for longer.
At upmarket golf and coastal reserve Zimbali, nine of 21 listings are still available over the festive period, says PGP area principal David Cameron. Asking prices range from R6,000-R12,000 a night for three- to five-bedroom homes.
Cameron says while his office is receiving inquiries, prospective holidaymakers have become more price-sensitive. “That’s despite the fact we are still charging the same rates as three years ago,” he adds.
Demand for short-term rentals has softened as prospective holidaymakers opt for ‘staycations’ this year. But investment in holiday homes is on the up
— What it means:
In contrast, the holiday rental sector in Cape Town and the coastal towns in the surrounding Overberg region has been more bullish.
Seeff Hermanus’s Cisca de Vries says the town’s holiday letting market has bounced back well, with December/January virtually fully booked. But, as with Zimbali, rates are flat — and have even dropped in some instances.
“In view of the economic challenges, people are looking for a good deal,” says De Vries. “Or they book for shorter periods due to more restricted budgets.”
Still, Ross Levin, MD for Seeff Atlantic seaboard and city bowl, expects Cape Town rates and occupancies to return to — and possibly exceed — pre-Covid levels this summer.
“After the two-year Covid chaos, there is pent-up demand for travel from both the local and international market,” he says. But, he adds, there’s still “adequate” availability for those who haven’t yet booked a stay.
Average rental rates in Cape Town range from R1,000-R3,000 a day, with top-end apartments close to the beaches commanding R3,500-R5,500 a day or more, depending on the property and location. Stand-alone villas in high-demand areas such as the Atlantic seaboard range from about R8,000-R18,000 a day.
While Cape Town’s hotel sector is also on the rebound, year-to-date occupancies and room rates continue to lag pre-Covid levels. The latest figures from international hospitality group STR show hotel occupancies in the city averaged 50.5% from January to September. That’s up from 27.2% for the same period last year, but still below 2019’s 63.4%.
Durban occupancies have recovered faster, and are now at an average 58.6%, up from 38.9% last year and not far off 2019’s 63%.
That makes sense because hotels are a lot cheaper in Durban than in Cape Town. Daily room rates in Durban average R889.95 (year to date), while Cape Town is nearly double that at R1,580.70. And, while Cape Town room rates are up 50% year on year, and back to pre-Covid levels, Durban’s are still below the prices fetched in 2019.
David Green, chair of Western Cape trade, investment and tourism promotion agency Wesgro, says the Mother City’s hotel recovery will be aided further by a marked increase in direct international flights to Cape Town.
He notes that these will soon breach 190 a week, supporting hotel occupancies and revenues, especially at the upper end of the market.
He adds: “We’re hoping Cape Town hotel occupancies will reach 70% within the next few months.”
In view of the economic challenges, people are looking for a good deal. Or they book for shorter periods due to more restricted budgets
— Cisca de Vries
Though demand for holiday lets and hotels is still recovering, it seems investments in second properties has surged.
Seeff Property Group chair Samuel Seeff says the purchase of holiday homes has picked up markedly in several coastal areas over the past two years. In Hermanus, just under 1,500 properties changed hands last year, from 788 in 2019. In the year to date, 1,021 Hermanus properties were sold — 30% ahead of 2019.
A similar trend is evident in nearby Kleinmond, Gansbaai and Betty’s Bay.
Seeff notes sales volumes have also ticked up significantly in popular Eastern Cape coastal towns such as Kenton-on-Sea and Jeffreys Bay.
Last year, 158 transactions were concluded in Kenton-on-Sea, 55% ahead of 2019’s 102. Sales have continued their upward march, with 166 properties sold there in the year to date.
In Margate on the KZN south coast, sales volumes rose to 1,432 last year, against 987 in 2019; another 1,047 homes have changed hands in the year to date.
It’s not only in South Africa that holidaymakers are re-entering the leisure property investment market. The pandemic might have disrupted three consecutive ski seasons in Europe, but demand for a mountainside base in popular snow belts is apparently at record highs.
“The global move to hybrid working, a rekindled love of the great outdoors and heightened interest in wellbeing have fuelled demand for ski properties in Switzerland, Austria and France,” says Kate Everett-Allen, head of international residential research at UK-based Knight Frank.
The rebound has seen Knight Frank’s ski property index, which tracks the price of four-bedroom chalets across 23 prime European ski resorts, rally 5.8% in the year to June. That’s up from 4.6% a year earlier and the strongest growth rate recorded by the index in eight years.
The Swiss resorts of Crans-Montana and St Moritz lead the annual rankings, with both notching up price growth of 14% in the year to June. Verbier in Switzerland, as well as Chamonix, Megève, Morzine and Les Gets in the French Alps, also outperformed.
Everett-Allen says US and UK buyers were particularly active, no doubt on the back of the weaker euro. Coupled with a stronger dollar, it’s meant Americans who bought a European pied-à-terre in October paid 15% less than they would have a year earlier.
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