Holiday home and rental investments taking off again

According to various banks and mortgage originators as well as Deeds Office data, there has been an increase in holiday home and rental property investments over the last year. The trend is driven by a shift in lifestyle as well as recovery of the tourism sector and the residential rental market.

Ooba for example reported that loan applications pertaining to rental property investments had increased to 12.9%, notably higher compared to the typical 5%-7% traditionally observed.

The trend has been especially prevalent in coastal hotspots such as the Cape, including the Garden Route. In terms of second home buying, lifestyle trends such as the ability to work from anywhere as well as the long-term view to eventually retire to the coast is often cited as drivers behind the trend.

Tourism and rising demand for rentals is the big driver behind the investment in the buy-to-let market. Standard Bank data (as of Feb 2025) shows that the Western Cape, which includes the Garden Route, is a leading hotspot for property investors, with 31% of new home loan applications in the province linked to buy-to-let ventures. This is more than double the national average of 12%.

Recovery of the rental market is a big driver behind the "buy-to-let boom," including reports that rental growth has reached an eight-year high, as reported by PayProp, alongside strong demand for rental accommodation.

In many instances, rental rates have increased at an accelerated pace over the last year. By January this year, the average national rental increased by 5.6% compared to 3.7% in January 2024. The Western Cape performed even better than the national average with rental growth of 9.6%.

Further good news for rental investors includes improved tenant behaviour and fewer vacancies. Data from TPN for example shows that the Western Cape remains a strong performer with a below average vacancy rate at less than 2%. This, despite the fact that the Cape has the highest rental rates, largely due to the high demand and shortage of rental accommodation in many area.

Another key observation from the rental market data shows that rents appear to have grown faster than property prices over the last year. The growth in rental rates also exceeded the average inflation, making these an enticing investment option for investors looking to expand their property portfolios.

The above average capital appreciation rates in the Western Cape are an additional boost for investors. Data from the various banks, Lightstone and StatsSA continue to point to the Cape as achieving property value growth well above the national average, and the highest in the country on average.

The latest StatsSA housing data for example showed that while the national average property price appreciation rate was around 5.6% in January, the Western Cape growth rates at 8.5% exceeded that by some margin.

Tourism recovery is well underway, and has been a notable boost for the holiday homes market. The Western Cape for example reported a 23% increase in visitors to key attractions over the recent summer tourist months. Aside from Cape Town International Airport reporting a notable increase of about 12% in arrivals over the summer (domestic, regional, and international), George Airport also reported a significant recovery.

Aside from more holiday makers and local buyers and investors, there has also been an increase in international buyers investing in second homes, especially along the Western Cape coast, including the Garden Route.

Property trends also tend to point to "growing demand for holiday apartments" and a "booming short-term rental market" in Garden Route towns like Plettenberg Bay, Knysna and George. Buyers are noted to include retirees, holiday home buyers, and those looking to combine a holiday purchase with renting it out.

Sectional title units (apartments) tend to be preferred as lock-up-and-go holiday homes and rentals. In the Plettenberg Bay area, however, wealthier buyers often prefer freestanding houses either in the estates (a growing trend in Plett) or outside of the estates.

The popularity of Plettenberg Bay as a destination is well reflected in the property market statistics. A recent Lightstone Report indicate that almost 40% of all properties in the town have changed hands over the last five years on the back of the significant increase in demand and sales activity. Buyers comprised a mix of retirees, holiday buyers, and those who are able to work remotely.

All of this has pushed prices up notably with Plettenberg Bay now counting among the most expensive coastal towns with 75% of all properties now valued over R3 million and some 7% valued over R10 million.

Ultimately, what all of this shows is that the Western Cape, and Garden Route towns such as Plettenberg Bay in particular is seen as a good property investment for a variety of reasons. Whether you aim to live here and enjoy the fabulous, stress-free coastal lifestyle, holiday here, or prefer to invest with the aim of leveraging good rental income, the market has been rewarding over the last few years.

That said, sellers and buyers should always do their due diligence to ensure they are making the best property decision. The same Lightstone Report also shows that overpricing seems to be the most prevalent in Plettenberg Bay compared to other towns in the Garden Route with sellers achieving on average only 88.5% of their average selling price as shown in the graph below.

According to various banks and mortgage originators as well as Deeds Office data, there has been an increase in holiday home and rental property investments over the last year. The trend is driven by a shift in lifestyle as well as recovery of the tourism sector and the residential rental market.

Ooba for example reported that loan applications pertaining to rental property investments had increased to 12.9%, notably higher compared to the typical 5%-7% traditionally observed.

The trend has been especially prevalent in coastal hotspots such as the Cape, including the Garden Route. In terms of second home buying, lifestyle trends such as the ability to work from anywhere as well as the long-term view to eventually retire to the coast is often cited as drivers behind the trend.

Tourism and rising demand for rentals is the big driver behind the investment in the buy-to-let market. Standard Bank data (as of Feb 2025) shows that the Western Cape, which includes the Garden Route, is a leading hotspot for property investors, with 31% of new home loan applications in the province linked to buy-to-let ventures. This is more than double the national average of 12%.

Recovery of the rental market is a big driver behind the "buy-to-let boom," including reports that rental growth has reached an eight-year high, as reported by PayProp, alongside strong demand for rental accommodation.

In many instances, rental rates have increased at an accelerated pace over the last year. By January this year, the average national rental increased by 5.6% compared to 3.7% in January 2024. The Western Cape performed even better than the national average with rental growth of 9.6%.

Further good news for rental investors includes improved tenant behaviour and fewer vacancies. Data from TPN for example shows that the Western Cape remains a strong performer with a below average vacancy rate at less than 2%. This, despite the fact that the Cape has the highest rental rates, largely due to the high demand and shortage of rental accommodation in many area.

Another key observation from the rental market data shows that rents appear to have grown faster than property prices over the last year. The growth in rental rates also exceeded the average inflation, making these an enticing investment option for investors looking to expand their property portfolios.

The above average capital appreciation rates in the Western Cape are an additional boost for investors. Data from the various banks, Lightstone and StatsSA continue to point to the Cape as achieving property value growth well above the national average, and the highest in the country on average.

The latest StatsSA housing data for example showed that while the national average property price appreciation rate was around 5.6% in January, the Western Cape growth rates at 8.5% exceeded that by some margin.

Tourism recovery is well underway, and has been a notable boost for the holiday homes market. The Western Cape for example reported a 23% increase in visitors to key attractions over the recent summer tourist months. Aside from Cape Town International Airport reporting a notable increase of about 12% in arrivals over the summer (domestic, regional, and international), George Airport also reported a significant recovery.

Aside from more holiday makers and local buyers and investors, there has also been an increase in international buyers investing in second homes, especially along the Western Cape coast, including the Garden Route.

Property trends also tend to point to "growing demand for holiday apartments" and a "booming short-term rental market" in Garden Route towns like Plettenberg Bay, Knysna and George. Buyers are noted to include retirees, holiday home buyers, and those looking to combine a holiday purchase with renting it out.

Sectional title units (apartments) tend to be preferred as lock-up-and-go holiday homes and rentals. In the Plettenberg Bay area, however, wealthier buyers often prefer freestanding houses either in the estates (a growing trend in Plett) or outside of the estates.

The popularity of Plettenberg Bay as a destination is well reflected in the property market statistics. A recent Lightstone Report indicate that almost 40% of all properties in the town have changed hands over the last five years on the back of the significant increase in demand and sales activity. Buyers comprised a mix of retirees, holiday buyers, and those who are able to work remotely.

All of this has pushed prices up notably with Plettenberg Bay now counting among the most expensive coastal towns with 75% of all properties now valued over R3 million and some 7% valued over R10 million.

Ultimately, what all of this shows is that the Western Cape, and Garden Route towns such as Plettenberg Bay in particular is seen as a good property investment for a variety of reasons. Whether you aim to live here and enjoy the fabulous, stress-free coastal lifestyle, holiday here, or prefer to invest with the aim of leveraging good rental income, the market has been rewarding over the last few years.

That said, sellers and buyers should always do their due diligence to ensure they are making the best property decision. The same Lightstone Report also shows that overpricing seems to be the most prevalent in Plettenberg Bay compared to other towns in the Garden Route with sellers achieving on average only 88.5% of their average selling price as shown in the graph below.

Sellers should therefore take note of the potential impact that overpricing could have, especially in a slower market. It not only delays the sale, but could reduce the buyer pool, and in the end the property could end up selling for less than what it might have if it were priced correctly upfront.

Seeff offers decades of success in helping clients open doors to new property aspirations. We have the experience, expertise, and tech-backed operations to achieve the best outcome whatever your needs. If you are considering selling your property or want to evaluate its current market value, please feel free to contact us.

Seeff Plettenberg Bay

044 533 0311

plett@seeff.com