Cape Town digital nomad concerns

The influx of digital nomads into Cape Town is not affecting the price of rentals within the city, something Airbnb has been blamed for.

Instead, the city’s slow building approval processes that limit the supply of affordable accommodation is driving up the price.

This is according to Cape Town mayor Geordin Hill-Lewis, who told Cape Talk the income requirements of South Africa’s new digital nomad visa means that these immigrants would only be interested in elite housing.

Digital nomads refer to people who work remotely and do not have a fixed place of residence.

“The digital nomad visa programme specifically targets people who earn a minimum of $40,000, which is roughly R750,000. I don’t have data, but I think in practice that most of them will earn significantly more,” Hill-Lewis said.

“The people earning R1 million are not driving up the rental prices for young Capetonians trying to move into their first place and trying to afford a one-bedroom or starter home.”

The exact minimum salary requirement is R650,796 per annum.

Hill-Lewis says that digital nomads are driving up the cost of elite housing in Cape Town’s more up-market areas, something he is “losing little sleep over.”

The mayor said the city’s very lengthy planning approvals process, which can take two years or more for a block of flats, is slowing down the supply of affordable accommodation in Cape Town and ultimately pushing up the price.

When asked about whether digital nomads or people visiting the city on tourist visas may be privileged over locals because of their economic advantage, Hill-Lewis said that supply, in this case, is still the issue.

“I think the scenario you are painting is quite likely. The only way to fix that is to speed up the pace of new supply, not by manipulating government regulation,” he said.

“Tourists are a huge blessing to our economy and are providing upwards of 100,000 jobs in Cape Town already.”

However, while certain areas like suburbs located next to the CBD, like Seapoint, Gardens, and Greenpoint, may be more competitive for South Africans to live in because of the influx of foreigners, he said the city has numerous other residential areas.

These include the northern suburbs, such as Durbanville, Edgemead (where he lives), and Tableview, and the southern suburbs, such as Claremont and Rondebosch.

Concerns over digital nomads are similar to recent complaints from Cape Town residents about how the attractiveness of short-term rentals to property owners using platforms like Airbnb was pushing up the price of long-term rentals.

Data from Inside Airbnb, a project that provides data and advocacy about Airbnb’s impact on residential communities, mentions that Cape Town has 23,564 listings.

This is more than San Francisco (7,888), Amsterdam (9,310), Athens (13,274), Berlin (13,759), Sydney (15,548), Tokyo (16,518) and Barcelona (18,925).

Data analyst Melville du Plessis 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 listing them as long-term rentals.

“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 Only Realty Property Group CEO Grant 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.”

As a result, the Department of Tourism proposed regulations for short-term rentals, including limiting the number of nights owners can rent their property on a short-term basis and creating a national registry of all short-term rentals.

The mayor’s comment in this article regarding the minimum income required for a digital nomad visa has been edited. The article initially said “$42,000 per month.“