Profit boom for second-home buyers as holiday rental market hots up – July 2021
- Secondary homeowners’ reports show that investment could be profitable after 1 year
- Massive spike in second-home investments seen in 2020
JOHANNESBURG, 1 JULY 2021 – It’s a buyers’ market. Rather, it’s a second-property buyers’ market. There’s been a notable uptick in South Africa’s property market over the past year due to combined interest rate cuts from the South African Reserve Bank (SARB) and the COVID-19 lockdown which has led to a rise in demand for exclusive-use getaways.
With the price of properties dropping, FNB recently reported that it had seen a 46% increase in the number of buyers who had bought a second property at the end of last year, compared with the same period in 2019.
Those investors are making their asset sweat, not only for personal use as a holiday home, but also renting them out to domestic travellers who are seeking exclusive-use, self-catering properties where families and friends can enjoy a break in a safe bubble, says Dillon Serretta, MD RnR, a full-service holiday home management and rental company.
“Maximising returns on these investments is best achieved by enlisting a professional marketing, reservations and property management company so that you can achieve the rates you want, and navigate hospitality considerations such as seasonality, minimum stays and guest services. When you’re looking for a partner, choose one with technology that allows for ‘live’ distribution across all the best-performing accommodation websites such as Airbnb, booking.com, TripAdvisor, for example.”
When all of this is in place, occupancies and annual revenue are significantly increased. In many cases the holiday rental revenue can exceed full bond instalments and all expenses, generating a profit from month one.
“We’ve seen incredible demand from South Africans wanting to travel with friends and family to local holiday destinations like Zimbali and Zebula, where investors are snapping up properties as second homes or to rent out for additional income,” says Serretta.
The COVID pandemic is driving demand for smaller accommodation where groups of friends or family members do not want to share their public spaces with strangers. “Along with this demand, and the rise in secondary properties being let out for short-term stays, we’ve seen a new need for property management, which has meant our own business has expanded from simply connecting guests to the right property.
“Investors do not want the hassle of having to focus on hospitality, but there is an expectation from this kind of guest that the property is serviced, including regular housekeeping, laundry, top-quality appliances, and basic maintenance which keeps them safe and comfortable during their stay,” adds Serretta.
According to the FNB research, the Western Cape and KwaZulu Natal are popular areas for secondary home purchases, with 31% and 26% of Gauteng home owner secondary purchases occurring in those provinces respectively.
For RnR, the demand for holiday properties across South Africa is high. “The supply is also growing, but it’s not outpacing the demand we are seeing from local travellers who are looking for a safe exclusive-use stay, which is a trend we believe will continue in the tourism and hospitality sector, beyond COVID. Renting out your second home through a holiday home management and rental company sweats your sound investment and is a hassle-free additional source of income for second-home investors.”
Serretta shares what investors can look for when investing in, and choosing, a second home for holiday rentals:
- Location: What is the historic (and current) demand, or average occupancies in your chosen location. Use this to calculate the annual revenue projections.
- Property Size: Requests for bigger properties, able to sleep 10 or more, are common but the number houses with five or more bedrooms rare. As a result, these bigger properties enjoy higher occupancies, rates per night and annual revenue. This means your initial investment will be more, but with superior returns.
- Unique selling points: Sea, water and mountain views are what many guests are looking for. These USPs will also significantly improve your returns.
- Past guest reviews: Be sure that your property can be properly maintained and serviced. These are the most basic services required to ensure good past guest reviews and are crucial to your prospects of future revenue.