Tech Thursday: 5 Things you need to know about Airbnb in South Africa

Airbnb is an online marketplace and hospitality service, enabling people to lease or rent short-term lodging including vacation rentals, apartment rentals, homestays, hostel beds, or hotel rooms. When it came to South Africa, it was lauded as a game changer for small business.  It was a welcomed financial booster especially for single mothers across the country and saw 10 000 properties sign up for it just in Cape Town alone.

Despite these positive attributes, the cracks of having Airbnb began to show in cities like Cape Town. More and more property owners began opting for Airbnb over renting their property, contributing to the gentrification problem. Airbnb pushed up real estate prices in favour of attracting tourists over catering for residents. People are then pushed out of the city centres into the outskirts because they cannot afford the inflated rental prices. What happened in Cape Town has resulted in a need for regulation as seen in other countries.

Here’s what you need to know about Airbnb in South Africa:

1. Airbnb showed the highest growth amongst BRICS based guests

According to stats released by the platform, South Africa saw the highest growth of 380% of guest arrivals from BRICS nations. South African hosts’ total income earned from BRICS-based guests ranks the highest of the five countries (Brazil, Russia, India, China) at $1.88m (about R24.3m). South African female hosts earned nearly $2 000 (R25 917.10), a lot more than their BRICS counterparts. According to the stats from the app, about 5.3 million Airbnb users from developing nations generated more than $467m over the past year. In South Africa alone, the app generated an estimated R2.4 billion in total economic activity across the country in 2016.

2. Airbnb has contributed to the housing crisis in cities like Cape Town

This map of Cape Town showing Airbnb rentals shows how Airbnb has contributed to the housing crisis in Cape Town. Activist groups like Reclaim the City are making the right kind of noise to highlight the need for affordable housing in the Cape Town CBD and surrounds, especially for low income people. They have highlighted the housing crisis in Cape Town where affordable housing for everyone is a major issue because provincial government has opted to sell property to international investors instead of saving these properties for low income residents. Airbnb enters an already complex situation and exacerbates it by further fueling the surge in property prices making it impossible for residents to afford to live there.

3. Property owners will now need permission before using their flats for Airbnb

This week, a new agreement was reached by the City of Cape Town that property owners need city permission before using their flats for Airbnb. The city’s Mayoral committe member for transport and urban development, Brett Heron, told Cape Argus that letting out through Airbnb was not permitted without the city’s consent. He encouraged people who knew of contraventions to the municipal planning by-laws to provide details to the city’s law enforcement staff who would then proceed with legal action if needed. According to the law, an owner who wants to let their flat short-term must ensure the property is appropriately zoned, and must apply for consent from the city’s development management department.

 

4. Airbnb growth is undeniable in South Africa but needs regulation

According to Airbnb stats, South Africans welcomed almost 400 000 guest arrivals into their homes in 2016 alone from just 38 000 guest arrivals in 2014, and 133 000 in 2015. As many as 16 000 people played Airbnb host in 2016 in SA earning an estimated R28 000 for 16 days they shared their home every year. This has resulted in a total of R817 million earned by Airbnb hosts and R1.6 billion spent by guests. Although these figures show a great potential in boosting tourism and contributing to the GDP, some kind of regulation is needed to make sure it does not affect living conditions of South African renters.

5. Owners should be aware of the tax implications of becoming an Airbnb host

Legal experts such as Jeremy Burman of Private Client Holdings have warned Airbnb hosts to think about the tax implications of earning this income and ensuring that adequate provision is made for any resultant tax liability. Airbnb income would fall into earning rental income, which is taxable because it is regarded as a trade by the SA Revenue Service (SARS). The owner of the Airbnb property must declare all rental income received or accrued during the tax year. He will in turn be entitled to deduct any expenses incurred in the earning of this income with the result that only the net profit will be taxable.

  AUTHOR
Caxton Central

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