The Real Benefit of Tourism for Real Estate

Government has plans to double the number of foreign tourists coming to SA to 21m a year by 2030 – and that could have major implications for the real estate sector, although probably not for the reason that most people would think.

It is always good to hear that foreigners who have been to SA on holiday or business have been so impressed that they have decided to buy a property here, or that a favourable rand exchange rate is bringing more overseas investors to internationally renowned holiday-home destinations like the Atlantic Seaboard, Cape Winelands and southern Cape “Golf Coast”.

But the real value of tourism growth to the property sector is the opportunities it opens up for South Africans to create new businesses and jobs that result in increased local demand for both commercial and residential real estate.

And tourism is already growing. The latest figures available from StatsSA show that there was a 1% increase in the number of foreign tourists arriving in SA during the first quarter of this year compared to the final quarter of 2018, and that SA is currently welcoming around 10,2m foreign tourists a year, compared to around 7m a year recorded in 2009.

In addition, domestic tourists account for around 44m overnight stays a year, and tourism as a sector is directly and indirectly responsible for around 9% of the country’s GDP as well as employment for at least 1,5m people.

There are also many examples throughout SA of how new economic life can be breathed into small towns and even rural areas by entrepreneurs who see the potential in attracting an increasing number of tourists to enjoy local attractions, cultural traditions, artistic talents or wildlife, and then follow through by opening guest-houses, craft and curio shops, artisanal restaurants and specialist tour operations.

Rising tourism numbers over the past few years have also resulted in a steady increase in the income derived from tourist accommodation – from R19,8bn in 2014 to R24,8bn last year – and the latest StatsSA figures show a 5,5% year-on-year increase in April 2019.

What is more, the hotel industry has experienced a 2,6% increase in income over the past year while those providing accommodation in lodges, B&Bs, self-catering units and ‘other’ units such as Airbnb rooms have seen a 13,9% increase, and this has naturally prompted local investors to buy more properties specifically to accommodate holiday or business visitors on either a long-term or short-term basis.

All of this activity is of course helping to create additional permanent and sustainable jobs in tourism – and is thus also a positive indicator for home ownership in SA, which remains a major aspiration for those who are able to secure stable employment.

However, before first-time buyers start looking for their perfect home, they really should consult a reputable bond originator like MortgageMax about financing their purchase. To start with, we can help them secure pre-qualification for a home loan which will not only give them an accurate idea of what they can afford, but also strengthen their hand when it comes to negotiating price with sellers.

Then once they have made an offer to purchase, we will use our multi-lender application process to ensure that they obtain the best interest rate available on their bond, and put them in line to make substantial savings on the total cost of their home over the lifetime of that bond.

Currently, the average variation between the best and worst rates offered on each home loan application submitted by MortgageMax is 0,5%, and on a 20-year bond of R750 000, for example, this translates into a potential saving of more than R59 000 over the lifetime of the bond, plus a total of about R3000 a year off the monthly bond instalments.