Picture: ISTOCK
Picture: ISTOCK

Forget conventional rental — a new index says Durban investors can pay off a home in just 18 months if they ditch normal rental in favour of Airbnb.

The 2017 property return-on-investment (ROI) index released by UK online realtor Nested says Durban presents the top global ROI opportunity for Airbnb investors, with Johannesburg coming in fifth.

The index, which was released last month, compares average sales prices for three-bedroom homes across 75 international cities with average rental incomes and Airbnb incomes. The resulting ROI figure is expressed in months, indicating how long it would take to recoup your initial investment.

The index suggests Durban properties could hit ROI equilibrium in just 18 months through Airbnb rentals

Durban properties (with an average sales price of US$94,343, or about R1.2m) could hit ROI equilibrium in just 18 months through Airbnb rentals, compared with 167 months (almost 14 years) for traditional rentals.

Lagos, Nigeria, holds the second spot with 22 months, but a much faster 132 months (11 years) for traditional rental — the shortest period when sorted by that variable. Johannesburg ranked fifth overall, with just 33 months (180 months, or 15 years, in traditional rental).

Interestingly, the top five slowest ROI cities for Airbnb rentals were Asian, including Beijing, Hong Kong and Taipei, with ROI figures in the region of 508-670 months (as much as 55.8 years).

Nested says in a statement that the point of the research was “to better understand global variations in real estate prices from an investment perspective”. It says data was drawn from record offices in each city as well as information collated by the World Bank, financial services company HSBC and its own research team.

Is SA an Airbnb gold mine? Or are the figures too good to be true?

One apparent failing of the research is that it assumes an 80% occupancy rate without delving into actual occupancy. It follows, then, that if your home is booked for only 40% of the time, reaching that magic ROI number in Durban would actually take about 36 months, not 18.

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Property journalist Lea Jacobs, writing for privateproperty.co.za, also argues that the research relies on false assumptions. It appears to have likened in-demand rental homes in upmarket areas with city-wide average sales prices.

She writes: “It appears that properties which command this type of [rental] figure are upmarket homes in upmarket areas like Umhlanga Rocks, and ... they cost way more than the R1.2m figure quoted in the study. According to Lightstone, over the past 12 months the average price of the majority of freehold property sold in Umhlanga Rocks was just over R6m.”

Nonetheless, Airbnb is growing fast in SA. Its own data from the 2016 winter season showed a 250% year-on-year increase (off a base of just over 19,000 guests), for a total of 67,000 guests in the period measured.

Airbnb’s data also shows that most guests are choosing Cape Town for their Airbnb visits, followed by Johannesburg and Durban. More than 12,000 Airbnb properties listed in Cape Town over the period, creating stiff competition. Additionally, SA cities did not feature in the international top nine cities list (by total guest numbers) that the company released for that period.

Janine Sullivan, Pam Golding Properties rental specialist for the Atlantic Seaboard, is of the view that while some owners are trying to let their homes using Airbnb, some are realising the amount of work a holiday booking entails, as well as the potential risks (many owners are away on holiday during these tenancies). She says many have chosen to return to the traditional rental model, opting to leave the admin to established rental agents.

What is undisputed though is that digital platforms for property sales and rentals have completely changed the game, leading to a rise in “professional” Airbnb investors and disrupting the traditional model. Furthermore, fixed-cost sales agencies are becoming more common, as sellers come to expect the convenience of an agency-supported interaction, with the immediacy, low costs and self-help approach typical of listing websites.

In accommodation-hungry markets such as New York and London, regulations and legislation are being implemented to curb the rise of tourist renters that is pricing locals out of the market. Perhaps this uncertainty is why bigger property firms don’t seem to be keen on getting their feet wet with Airbnb.

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