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Cape Town's bumper summer season will boost property value

02 May 2014, 11:43

This summer Cape Town recorded its highest tourism figures ever, with both local and international tourists flocking to white sandy shores of the Cape. What does this mean for property investors and home owners wanting to sell?

The multiplier effect of tourism expenditure provides a significant boost to the local economy and this encourages local home buying.  In addition, tourism can lead to a direct increase in property values in those areas most favoured by tourists such as the V&A Waterfront and the Atlantic Seaboard.

In addition, tourists who don't stay in hotels and guest houses, but rent an apartment or house create additional demand for rental accommodation (particularly during the summer tourist season) and this will push up rentals. In turn, higher rentals can lead to higher property prices.

As tourism increases, it can result in the construction of new hotels to meet the anticipated demand. Building hotels creates competition for land that may otherwise have been put to greater economic benefit and increases land prices.

Exposing international tourists to the beautiful landscape and investment opportunities along these scenic routes is necessary to market Cape Town as a prime property market. Property ownership from countries in the UK and Europe has increased, especially since Cape Town is only an overnight flight away without any meaningful time differences.

Tourist numbers are influenced by the relative strength of the Rand.  When the Rand weakens, South Africa becomes a more attractive foreign tourist destination and even our property prices look cheap.  So in times when the South African economy is struggling (which is usually mirrored by a depreciating currency), an increase in tourism has a positive effect on rentals and on property prices in those areas that foreigners favour - so Cape Town's property market will benefit in comparison to other SA cities that aren't viewed as tourist destinations.

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