MAIN IMAGE: Grant Smee – CEO of Only Realty, Nick Taylor – Managing Director of Nox Cape Town and board member of the South African Short-Term Rental Association (SASTRA)
Kerry Dimmer
Cape Town’s rental market is undergoing a structural shift, one that is simultaneously placing pressure on long-term tenants while opening a strategic growth window for rental management agents.
For many long-term renters, the experience has become increasingly precarious. Fixed leases are being shortened or seasonally adjusted, with landlords prioritising high-yield peak tourism periods between November and February. In some cases, tenants are faced with either vacating during peak months or absorbing substantial rental increases to remain in place.
This trend is no longer confined to the City Bowl. It is filtering into outlying suburbs, driving up costs and reducing accessibility, with knock-on effects for those seeking work in the city. Recruiters are noting that while job opportunities are available in the region, when the salary doesn’t match cost-of-living expenses, candidates start to question whether they can afford to accept an offer.
The underlying economics are difficult to ignore. According to Grant Smee, CEO of Only Realty, only seven out of every 100 rental properties are currently available for long-term letting. “While the figure of 26,000 Airbnb listings (InsideAirbnb) is striking on its own, what really fanned the flame was the finding that roughly 70% of residential units in Cape Town’s CBD are either hotel-managed or listed on Airbnb (City of Cape Town’s Local Spatial Development Framework),” he says.
“Consider the math. In a city already grappling with a severe shortage of long-term rentals, the median household income sits at around R14,000, yet a basic CBD Airbnb studio can cost roughly R36,000 for a 30-day stay. Small wonder the debate caught fire among fed-up locals, and the City of Cape Town is listening.”
Regulatory reset underway
The City of Cape Town is advancing a regulatory framework aimed at bringing short-term rentals more in line with formal hospitality operators, explains Nick Taylor, managing director of Nox Cape Town and board member of the South African Short-Term Rental Association (SASTRA).
“Central to this is a proposed bylaw that would see properties used primarily for commercial short-term letting reclassified and taxed at commercial rates, potentially doubling or tripling municipal bills for some owners.
“At the same time, compliance expectations are tightening. While short-term letting remains permissible, operators are required to adhere to zoning regulations and safety bylaws. A proposed registration system is expected to introduce, for the first time, a verified view of the STR market. With a one-year registration window anticipated from July 2026, meaningful data is, however, only likely to emerge by mid-2027.”
Uncertainty also remains around the thresholds that will trigger registration. “These are expected to be based on the proportion of the property used for STR and the percentage of the year it is available, with market estimates ranging between 40% and 60%,” says Taylor.
Nationally, the Tourism Ministry is reinforcing this direction through its Interim Code of Good Practice for Short-term Rentals. The Code aims to formalise the sector, shifting it away from informal hosting toward structured, professional hospitality management. Proposed measures include safety compliance, rental caps of 90 days per annum, and mandatory data sharing with government. The Interim Code is currently open for public comment.
Pressure points for agents
Taylor describes the Code as a necessary step toward standardisation, even though at this time, it lacks enforceability.
“It introduces a clear expectation that STRs are not informal side businesses but part of the formal tourism economy,” he says. “Where it becomes meaningful is in raising the standard of the industry and giving it credibility.”
However, the operational burden is increasing, particularly for agents and property managers. The regulations formally recognise “designated persons,” effectively positioning agents as compliance custodians. Responsibilities now extend beyond leasing into zoning compliance, safety standards, occupancy control, insurance adequacy, and enforcement of conduct rules within sectional title schemes and HOAs.
“The risk,” notes Taylor, “is that compliance responsibility may increasingly fall on professional operators, while informal hosts continue to operate outside the system. Ultimately, enforcement, not just guidance, will determine whether this has real impact.”
Opportunity: expanding the rentbook
Within this complexity is a commercial opportunity. The raising of the barrier to entry for informal and self-managed hosts means that landlords operating STRs as a secondary income stream may find the operational requirements too onerous to manage independently, creating a dual pathway for rental management agents to expand their rentbooks.
The first is within the STR market itself. As compliance requirements intensify, there is an incentive for owners to outsource to professional managers capable of navigating regulatory frameworks, ensuring bylaw alignment, and managing operational risk.
The second opportunity lies in a rebalancing toward long-term rentals. Not all STRs will remain viable under increased scrutiny, higher municipal tariffs, and potential usage caps. Marginal operators may, therefore, pivot back to long-term letting in pursuit of stability and reduced compliance exposure.
For rental agents, this represents a pipeline of potential stock entering the market. However, capturing this opportunity will require a shift in positioning. Agents will need to operate like asset managers, providing landlords with strategic guidance across short-, medium-, and long-term rental models, shifting their value from transactions to risk mitigation.
Skills shift
This transition will also potentially drive new skills requirements across the sector. Taylor points to increased demand for structured training programmes, potential accreditation frameworks, and a growing emphasis on legal compliance, health and safety, and guest management systems.
“In short, the industry is moving from ‘anyone can host’ to ‘you need to know what you’re doing,’” says Taylor.
This professionalisation is expected to reshape the market. “While there is a perception that regulation will immediately release large volumes of stock back into the long-term rental pool, this is likely overstated,” says Taylor.
“The economics of STRs in key areas like the Atlantic Seaboard remain significantly stronger, and the proposed tariff increase by the City of Cape Town will, most probably, have a larger impact on the supply and demand economics.
“In the short term, this Code alone won’t materially reduce supply as it’s ‘guidance’ and not a direct regulatory enforcement. However, it is clearly laying the groundwork for more formal regulation, professionalisation, a gradual exit of low-compliance or marginal hosts, stabilisation of supply, and limited short-term pricing as demand for Cape Town, as a global destination, remains strong.
Uncertainty
For now, uncertainty remains. Soon, City officials are expected to begin to leverage data to identify properties operating as ‘de facto’ commercial entities, so landlords are encouraged to reassess their rate classifications and compliance status with some haste.
“The real risk right now isn’t regulation, it’s uncertainty,” says Smee. “Property owners should be stress-testing their investment assumptions. They should be asking themselves that if rates rise or occupancy limits are introduced, will the numbers still work? Investors who succeed in this market will be those who adapt quickly to the evolving regulatory landscape, rather than waiting for the dust to settle.”
Strategic inflection
The Cape Town’s rental market is approaching a strategic inflection point.
For tenants, the immediate outlook remains constrained, with affordability and availability under pressure.
For regulators, the challenge is balancing tourism growth with housing accessibility.
For rental management agents the shift presents a rare alignment of market forces: regulatory complexity, operational burden, and investor uncertainty – all of which increase the need for professional intermediation.
“While it is comforting to know that the STR sector is now firmly on government’s policy agenda, it needs to be implemented properly with clear enforcement and alignment with municipal frameworks. I believe it can help legitimise and strengthen the industry. If not, it risks becoming another well-intentioned document that only compliant operators follow,” says Taylor.
