End of the line for Airbnb property owners in Cape Town

Cape Town’s proposed short-term letting by-law could push many Airbnb property owners towards long-term rentals by imposing commercial property rates on homes used for short-term accommodation for most of the year.

This was explained by Chas Everitt Atlantic Seaboard and City Bowl office principals Adel and Charl Louw.

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.

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.

Under the proposed framework, properties will be classified as commercial if they are not primary residences.

They will also be classified as commercial if they 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.

Hotels, guesthouses, and bed & breakfasts (B&Bs) already pay commercial rates. However, short-term rentals, such as Airbnbs, have historically been excluded.

While the city has stressed 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,” Adel and Charl explained.

“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.”

However, these proposed changes do not mean that Cape Town’s Airbnb property owners are losing their source of income.

Rather than making a hasty decision to sell these properties, Adel and Charl urged investors to recognise a compelling opportunity to pivot towards long-term rentals now.

A way forward for Airbnb hosts in Cape Town

Fortunately for those who invested in Cape Town’s Airbnb boom, the city’s long-term letting sector is currently experiencing significant undersupply.

“There is a chronic shortage of long-term rental stock across the metro, particularly in central areas and along the Atlantic Seaboard,” Adel and Charl noted.

“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, the average was between R11,000 and R12,000 per month.

Those in central Cape Town range from R13,000 to R15,000 per month for one-bedroom units and start at around R19,000 for two-bedroom apartments,

Meanwhile, prime properties in sought-after areas often achieve significantly higher figures, Adel and Charl said.

“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, switching to long-term letting could provide investors with stable, predictable income streams while still benefiting from strong capital growth, Adel and Charl said.

This approach could also help property owners avoid 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.

However, they warned that a key consideration for landlords who make the change is securing reliable, financially stable tenants who will honour their lease agreements and keep the property in good condition.