Proposed regulations for short-term rentals in South Africa could affect the entire industry, causing many to consider whether remaining in the market is viable and making others sceptical of buying into it.

This is according to Only Realty Property Group CEO Grant Smee, who spoke to Cape Talk about the proposed regulations.

“Ultimately, like any hospitality industry, your money is made on vacancy levels and the fewer nights you are empty, the more money you make,” said Smee.

“If the government limits how many nights you can rent the property out, that’s going to be a massive issue for almost all Airbnb owners.”

Smee is referring to regulations proposed by Airbnb in a report released at the beginning of October. The report provided case studies on how South Africa can regulate the short-term rental market.

These included limiting the number of nights owners can rent their property for if done on a short-term basis and creating a national registry of all short-term rentals.

This followed backlash from Cape Town residents after claims that many felt they were being priced out of the city due to short-term rentals pushing up property prices.

“There is a large speculative market when it comes to Airbnb. On the rental side, hosts will rent a property and then re-rent on Airbnb, pushing up the long-term rental prices and limiting stock for renters,” said Smee.

“There are also speculators and investors buying property for Airbnb, often paying a premium for that property because the returns are much higher on the platform. This also pushes prices up.”

Smee pointed to the example of the Atlantic Seaboard area — which includes areas like Camps Bay and Seapoint — where any available property suitable for Airbnb is snatched up. He said this created ongoing momentum of price increases.

He was asked how property rights play into the matter, regarding how one should be allowed to do with their property or investment as they please.

To this he replied that while there may be an argument for this on the individual level, one needs to consider how this is affecting the market as a whole.

Airbnb concerns in Cape Town

Data analyst Melville du Plessis recently compared the number of long-term rentals to short-term rentals in Cape Town Metro.

Of the 7,918 rentals available in the 61 square kilometre area, only 547 are long-term rentals or 6.9%.

While this metric does not compare total short-term listings to total long-term listings, it illustrates the supply of long-term listings.

It also excludes areas generally out of reach of most people’s budgets, such as Camps Bay, Fresnaye, and Clifton.

Short-term rentals prove far more lucrative when looking at the difference in return between the two markets.

Comparing the average daily rate, short-term rentals were 271% more expensive than long-term rentals.

Looking at the monthly return of short-term rentals and assuming a 50% occupancy rate, only three of the ten suburbs offer a higher income from long-term rentals.

Therefore, Capetonians are incentivised to list their properties on Airbnb and similar platforms rather than as long-term rentals.

However, buying up or controlling over fifty properties to take advantage of this opportunity raises questions about the unintended consequences caused by the platform.

In their original pitch deck to investors, which helped them secure $600,000 (R10.5 million), Airbnb founders Brian Chesky, Joe Gebbia, and Nathan Blecharczyk used the slogan “book rooms with locals rather than hotels.”

The three believed their platform would help travellers save money, hosts make money, and tourists experience the culture, as hotels create a disconnect from the city.

In its report, Airbnb mentioned that 49% of hosts said the extra income helped them afford their homes, and 50% said it helped them afford the rising cost of living.

Here, it emphasised that its platform supports South African homeowners by allowing them to earn an extra income and cope with the rising cost of living. However, its top six Cape Town profiles own and control a combined 681 listings.

Of these 681 listings, 678 are entire houses or apartments, according to data from Inside Airbnb.