Property owners are gearing themselves for the lucrative renting market in 2010, when South Africa hosts the Soccer World Cup, but should be cautious as the football party tenants descend en masse.
The World Cup is less than three years away and South African property owners have spotted a potential gap in the market, as a shortage of accommodation is likely with more than a million tourists expected.
There are already advertisements in South African newspapers and radios calling for homes to be registered as accommodation for 2010.
However, such tenants could cost property owners whose risk profile increases as soon as their property starts earning income.
“There is the genuine chance there will be damage to the house or its contents that will only be discovered after the renting party has disappeared back to their country of origin,” says Craig Young, national manager of short-term insurance at MortgageSA, one of South Africa’s leading bond originators.
“Even if the property owner insists on a deposit, this may not be sufficient to cover the damage caused and, because of the change in risk profile, insurers may not be prepared to pay,” warns Young.
Soccer has a history of hooliganism, and out-of-control fans can cause hundreds of thousands of rands’ worth of damage to property. There has been an average of 3Â 350 arrests in the United Kingdom in the past five seasons as a result of violent behaviour and property destruction.
Tenants generally do not look after properties as carefully as owners would and, fuelled by alcohol, destruction of property is often inevitable.
“If they decide to rent out your property for the 2010 games, property owners should make certain they have the correct insurance in place,” says Young. “The consensus amongst home insurance advisers is that your ordinary domestic insurance policy will not suffice.
“We strongly advise that property owners inform their insurers well before the tenants are due to arrive. They will review the policy for the duration of the tenants’ stay and underwrite the risk appropriately.
“If owners fail to inform their insurer, they will most likely incur a hefty penalty should they claim for damages after the tenants have left.
Young added: “While renting out your own property for the 2010 games may appear to be a lucrative scheme, the party tenants may cause more damage than profit.
“It is also worth noting that as soon as a property owner is earning an ongoing income from their homes, there is an increase in risk profile and their risk moves to be a business risk, much like a bed and breakfast.”