The new Short-Term Letting By-Law recently proposed by the City of Cape Town will affect many property investors who have acquired homes and apartments specifically to let them out via Airbnb and other booking platforms – but they should think twice before deciding to sell these properties.
That’s the word from Adel and Charl Louw, principals of the Chas Everitt Atlantic Seaboard and City Bowl office, who note that from 1 July 2027, owners of any property that is let on a short-term basis for more than 50% of the total annual room nights available can expect to pay commercial rather than residential property rates.
However, rather than making a hasty decision to sell these properties, they say, investors should know that there is a compelling opportunity now to pivot towards long-term rentals, which is a sector currently experiencing significant undersupply in Cape Town.
“There is a chronic shortage of long-term rental stock across the metro, particularly in central areas and along the Atlantic Seaboard,” they note. “Demand is exceptionally strong, vacancy rates are extremely low, and well-priced, well-located properties are being let very quickly.”
The latest statistics show that while rentals in the Western Cape grew by almost 7% last year to average between R11 000 and R12 000/ month, those in central Cape Town range from R13 000 to R15 000/ month for one-bedroom units and start at around R19 000 for two-bedroom apartments, with prime properties in sought-after areas often achieving significantly higher figures.
“In addition, vacancy rates are generally well below 2%, underscoring the strength of tenant demand, and rental properties in Cape Town also have good capital growth potential. Property values in the city rose by an average of 9% last year, and rental supply continues to lag demand despite ongoing new development.”
In this context, the Louws say, switching to long-term letting could provide investors with stable, predictable income streams while still benefiting from strong capital growth - and avoiding the potential increase in operating costs associated with commercial rates. (According to background information provided by the City, long-term rentals will remain classified as residential properties under the new policy. See https://resource.capetown.gov.za/cityassets/Media%20Centre%20Assets/CCT-short-term-letting-FAQs.pdf)
But a key consideration for landlords who make the change, they caution, is securing reliable, financially stable tenants who will honour their lease agreements and keep the property in good condition. “This is where working with a professional agency becomes critical, and at Chas Everitt, our specialised rental management division conducts thorough vetting, credit checks and ongoing management to protect landlords’ assets and ensure consistent returns.”
The new by-law has been proposed as part of the City’s move to enforce existing policy more consistently and ensure fairness across the accommodation sector, where hotels, guesthouses and B&Bs already pay commercial rates. Under the proposed framework, properties will be classified as commercial if they are not primary residences and are used wholly for short-term letting, or if they are available for short-term letting for more than 50% of their total annual room nights.
And while the City has emphasised that it continues to support tourism and does not intend to restrict short-term letting, the Louws believe the policy shift will naturally rebalance portions of the market. “Short-term letting will remain a viable and important part of Cape Town’s tourism economy, but for many investors, especially those operating at scale, the numbers may increasingly favour long-term rentals, and given the current supply-demand dynamics, that will be a very attractive position to be in.”
Issued by
Chas Everitt International
For more information
Contact Charl Louw on
On +27 83 303 3131
Or visit www.chaseveritt.co.za
