Why boosting tourism will benefit SA's property market

During the recent SONA, President Ramaphosa announced that further support would be given to the tourism sector to market South Africa and double the number of foreign tourists to 21 million a year by 2030 - a goal that could have major implications for property.

A healthy tourism sector goes hand-in-hand with a healthy property market - and not for the reason that most people may think, says Rudi Botha, CEO of national bond originator BetterBond.

"It is always good to hear that foreigners who have been to South Africa 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'," says Botha.

"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 fortunately, he notes, tourism is 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 10.2 million foreign tourists a year, compared to around 7 million a year recorded in 2009.

In addition, domestic tourists account for around 44 million overnight stays a year, and tourism as a sector is directly and indirectly responsible for around 9% of the country's GDP and employment for at least 1.5 million people.

Botha says there are already 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 guesthouses, 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 R19.8 billion in 2014 to R24.8 billion last year - and Botha says 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, he says, is helping to create additional permanent and sustainable jobs in tourism - and is thus also a positive indicator for homeownership 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 about financing their purchase.

"To start with, we can help them secure prequalification 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," says Botha.

"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."

Currently, he says the average variation between the best and worst rates offered on each home loan application submitted by BetterBond 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 R3 000 a year off the monthly bond instalments.

article courtesy Betterbond