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Should you buy commercial property in holiday towns in SA?

According to the Capex rate, commercial properties are more profitable than residential properties, but does this apply to holiday towns? We discuss.

Buying Commercial Property In Holiday Towns

Article summary

  • Retail and hospitality properties are potentially profitable investments in holiday towns.
  • Office complexes don’t make sense as an investment as most people are moving to holiday towns to escape the office.
  • Increased semigration to holiday towns is a factor investors need to take into account.

For many property investors, the first thing that comes to mind is residential properties, whether houses in scenic, family-friendly locations; or apartments in busy business districts.

But are you aware of the lucrative opportunities presented by commercial properties?

According to the Capex rate, commercial properties are currently a more profitable investment than residential properties. The Capex rate in South Africa is currently +11% for commercial properties, versus 5-8% for residential properties.

What is a commercial property?

A property dedicated to business purposes, whether office complexes, retail establishments or industrial properties.

The importance of location

As with any property investment, location is key. However, location requirements for commercial properties differ from those of residential properties.

The things you should be looking for vary according to the type of commercial property.

For example, retail properties should be near bustling business districts, whereas industrial properties should be in remote areas.

What about remote locations?

Now we come to the gist of it. Commercial properties in major metros would do well, but what about those in far-flung locations such as holiday towns?

Residential properties in the form of holiday homes are naturally a winner. Residential properties intended for permanent occupation are also viable as more people are looking to work remotely from scenic, spacious locations.

And commercial properties? Well, that depends on the type of commercial property. We provide a rundown.

Industrial properties

Cities are running out of space for industrial properties, which makes remote locations a necessary investment option. However, remote locations doesn’t include holiday towns, where residents won’t appreciate the noise and pollution of industrial properties.

Office complexes

Not an ideal investment for holiday towns. Most people move to holiday towns to ESCAPE offices. Those who are working are usually moving to holiday towns so they can work remotely from a scenic and peaceful location.


A potentially profitable investment. More people moving to holiday towns means more demand for areas where they can purchase supplies, food, and other necessities.


The obvious investment target.  Hotels, restaurants, and other establishments aimed at tourists are likely to perform well in holiday towns.

The impact of semigration

It’s common knowledge that the Western Cape is the prime target for holiday-goers. Still, as semigration becomes a bigger factor, the Western Cape becomes a growing residential hub as well.

More people are moving to the Western Cape from other parts of the country. As metro areas become overcrowded, holiday towns will become increasingly desirable destinations for residents as well as holidaygoers.

Property investors should take this into account. Retail becomes a more profitable investment as residential areas grow, and in time, perhaps even office complexes will begin to pop up in tandem with increasing populations in holiday towns.

The differences between commercial and residential property

  • Investing in a commercial property is purely business-related. Emotion doesn’t come into it, whereas purchasing a home is about more than just business.
  • Most banks will only finance up to 75% of a commercial property purchase, meaning you’ll need a deposit of at least 25%.
  • Banks usually require commercial property loans to be paid off in under 10 years instead of 20 or 30 years for a home loan.

Get the best deal on your investment

Whether you’re looking to invest in commercial or residential property, it makes sense to get the best deal on your bond so you can increase the gap between expenses and income.

Applying with ooba Home Loans will help you get the most favourable monthly repayments and interest rates. We submit your application to multiple banks so you can compare deals and choose the one best suited to your requirements.

We also offer a range of tools that can make the homebuying process easier.  Start with our Bond Calculator, then use our Bond Indicator to determine what you can afford. Finally, when you’re ready, you can apply for a home loan.

Get a free home loan comparison.

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