Zanzibar’s real estate market has emerged as a high-growth, high-yield environment in the mid-2020s, attracting global investors with its combination of rapid price appreciation and robust rental returns. Property values on the islands have been climbing at double-digit rates annually in prime areas, and rental yields for holiday properties are reaching levels unheard of in many other markets. This data-driven overview breaks down the current price per square meter in key Zanzibar locations, traces the island’s property price index growth in recent years, and outlines typical rental incomes and return on investment (ROI) benchmarks for both short-term vacation rentals and long-term leases.
Several factors have fueled Zanzibar’s booming property market. Tourism has roared back with record numbers of visitors, creating surging demand for accommodation. In 2024 the islands welcomed roughly 736,755 international arrivals, up 15% from the previous year – a post-pandemic high that is edging close to Zanzibar’s ambitious targets. Tourists also tend to stay longer (about 8 nights on average) than in many other destinations, supporting strong occupancy rates for holiday rentals. During peak season, occupancy routinely exceeds 90%, with December 2024 seeing an island-wide hotel bed occupancy of 92.4%. Even on a yearly basis, average occupancy hovered around 62% in 2023, underscoring solid year-round demand despite some seasonality.
Foreign investor interest is another driver of growth. Non-resident buyers now account for nearly one-third of property transactions in Zanzibar. New government measures have further opened the market – for example, a Class C11 investor residence permit introduced in 2024 offers renewable 2-year residency to foreigners investing at least US$100,000 in approved projects. Combined with Zanzibar’s 99-year leasehold structure and ongoing infrastructure upgrades, these trends have lowered barriers and increased the flow of international capital into Zanzibar real estate. On the supply side, development has struggled to keep pace with demand. Construction costs have risen and financing is expensive (mortgage rates ~17%). Yet the pipeline of new homes remains modest – only on the order of a few hundred units per year – which keeps competition high for completed properties. In short, robust tourism, investor-friendly policies, and constrained supply have tilted the market in favor of property owners, driving up both prices and rental returns.
Zanzibar property prices vary widely by location, with coastal resort areas commanding significant premiums over the historic urban center. All price figures below refer to built property (finished apartments or villas) and are typically quoted in US dollars per square meter of built area:
Zanzibar’s property market has been on a strong upswing over the past five years. An analysis of listings and transaction data shows an island-wide compound annual growth rate (CAGR) of roughly 10% in residential property prices from 2019 through 2024. To visualize this, if we set the year 2019 as a base Price Index of 100, by 2024 the overall market index had risen to about 160. In other words, average property values in 2024 were approximately 60% higher than in 2019, in nominal USD terms.
However, this headline growth varies notably by sub-market. Prime resort zones have significantly outpaced the historic core of Stone Town in appreciation rate:
Overall, Zanzibar real estate has delivered robust price appreciation in recent years. Even during the global pandemic downturn, property values held firm and then accelerated as tourism rebounded. Looking ahead, most analysts anticipate continued growth, though perhaps at a tempered pace. Even conservative forecasts see Zanzibar property prices continuing to rise in 2025–26 (on the order of 3–7% annually in a base-case scenario). More optimistic outlooks project that if tourism expansion and foreign investment remain strong, annual price increases in the high single digits to low teens could persist into the mid-2020s. In short, the trajectory of the price index is expected to remain upward, underpinned by constrained coastal supply and Zanzibar’s growing stature as an investment and lifestyle destination. Even in a bearish case, nominal prices are not expected to fall – a reflection of how fundamentally undersupplied and in-demand this market has become.
One of Zanzibar’s biggest attractions for real estate investors is the exceptional rental yields on offer, especially for short-term vacation rentals. Thanks to the thriving tourism sector and a shortage of quality rental stock, gross rental returns of 14–18% per year are routinely achieved on well-managed beachfront villas in hotspots like Paje, Nungwi, and Jambiani. In practical terms, this means a luxury holiday villa could generate roughly 14-18% of its purchase price in rental income each year – a remarkably high yield by global standards. High-season weeks command premium rates, and professional property managers can keep occupancy and nightly pricing optimized. Indeed, hotel industry data confirms that peak-season occupancy frequently tops 90% in Zanzibar’s resort areas, giving investors the demand needed to convert those headline yield percentages into actual cash flow.
By contrast, long-term rentals (such as year-long leases to expatriates, NGO staff, or local professionals) offer lower yet still solid returns. Across popular residential areas outside the main tourist strips – for example, up-and-coming suburbs like Fumba Town or Mbweni – a typical two-bedroom apartment can fetch a gross yield of about 7–9% annually when rented on a conventional 12-month lease. These long-term yields, while roughly half the level of short-term holiday let yields, are still above local bank deposit rates and outperform many other African city markets. Notably, net yields (after expenses) will be a bit lower: once you deduct maintenance, property management fees, service charges, and Zanzibar’s annual land lease fees, investors should expect about 1.5–2 percentage points off the gross figures. That still leaves net yields of roughly 5–7% for long-term rentals – very healthy compared to prime rental markets in cities like Nairobi or Cape Town, where upscale residential properties often yield only ~4% gross.
For short-term holiday rentals, the net operating yield also depends on management costs and seasonality. Property managers typically charge 20–50% of gross rental revenue as their fee. There are also periods of low tourist arrivals (off-season months) that bring occupancy down – for instance, while December can see 90%+ occupancy, the island-wide average was ~62% in 2023. When accounting for these factors, many vacation rental owners still report high-single-digit to low-double-digit net yields. In concrete terms, a well-located beachfront villa that grosses 14% might net around 10–12% after management fees, maintenance, and vacancy – a strong cash-on-cash return. Owners catering to the “digital nomad” or remote worker segment also see steady bookings (average Airbnb occupancy ~41% year-round at ~$50/night in one 2024 survey), translating to mid-single-digit yields even for smaller units, with upside if occupancy is optimized.
To put Zanzibar’s rental returns into perspective, they outshine many other markets. According to regional comparisons, Zanzibar’s gross yields of 12–17% in prime areas dwarf the typical 2–5% rental yields found in many mainland African cities or other Indian Ocean destinations. Even modest urban apartments in Stone Town can achieve 6–8% gross yield, which is competitive globally and far higher than, say, Dar es Salaam’s 2–4% band for prime rentals. This yield premium is largely driven by tourism: a property in Zanzibar has the potential to earn high nightly rates from vacationers, whereas a similar property in a non-tourism-focused city relies on lower monthly rents from local tenants.
When evaluating Return on Investment (ROI) in real estate, investors look at both rental income (yield) and capital appreciation over time. Zanzibar scores strongly on both fronts in recent history. A simple benchmark for a prime Zanzibar property might be: roughly 12–17% annual rental yield in a vacation rental scenario, plus around 10% annual capital gain in value (based on recent price growth averages in key locations). This suggests a potential total return in the mid-to-high teens per year for well-chosen properties – an almost unheard-of figure in more mature property markets. For instance, an investor who purchased a beachfront villa a few years ago could be seeing double-digit rental cash flow while also watching the property’s resale value appreciate by double digits yearly. Even more conservative assets like Stone Town apartments, with ~6-8% yields and slower price growth, could deliver combined returns around 15% annually (e.g. 7% rent + 7% appreciation).
It is important, however, to benchmark ROI expectations by property type and management strategy:
In setting ROI benchmarks, investors should also consider costs and taxes. Zanzibar imposes a 0.5% transfer tax and 1% stamp duty on property purchases, and rental income is taxed at 15% for non-residents. These factors slightly trim the net returns. Additionally, annual land lease fees apply (usually modest, around $1–5 per m² depending on location). Even with these costs, Zanzibar’s net ROI remains highly attractive. Savvy investors often reinvest rental profits into property upkeep or additional units, compounding their returns as the market climbs.
Zanzibar’s property market in 2024–2025 stands out as a high-yield, high-growth opportunity supported by genuine demand drivers. Tourist numbers are hitting record highs and are projected to keep growing, with forecasts exceeding 1 million annual visitors by the mid-2020s. This underpins a thriving short-term rental market and helps explain why Zanzibar rental yields (8–15%) surpass those in many traditional markets. On the capital appreciation side, the Zanzibar Property Price Index has been on a steep upward trajectory (approximately +60% in five years), and even cautious predictions see continued growth in the coming years. Limited developable beachfront land and new construction means that supply remains tight, especially for high-end resort properties – a recipe for sustained price increases as long as demand holds.
For investors, the key ROI benchmarks to remember are: roughly 12–17% gross yields in resort rentals, around 7–9% in long-term leases (higher for short-let, lower but steadier for long-let), and around 5–10% annual capital growth in property values (depending on location). These figures make Zanzibar an outlier in a positive sense – few markets worldwide offer double-digit rental returns paired with double-digit appreciation potential. Of course, investors should conduct thorough due diligence: factor in management fees, seasonal occupancy swings, and the unique legal framework (99-year leaseholds and required government approvals) when calculating their personal ROI.
In summary, Zanzibar has evolved into a compelling real estate investment destination by the mid-2020s. Its blend of affordable prices (still in the low thousands per m²), strong tourism-driven rents, and pro-investment climate (foreign ownership allowed, new residency permits, tax incentives) creates an environment where well-chosen properties can yield healthy cash flow and significant equity growth. As long as Zanzibar’s tourism and “Blue Economy” initiatives continue on track, the island’s property price indices and ROI benchmarks are likely to remain on the upswing, offering investors an attractive balance of income and appreciation. Zanzibar real estate has truly become a rising star, turning the heads of everyone from expatriate entrepreneurs to international funds – all drawn by the promise of sun, sand, and solid returns in this Indian Ocean paradise.
Sources: Recent market analyses and data on Zanzibar real estate prices, yields, and tourism trends.
