Short-Term Accommodation as new revenue source for Property Investors

Residential property investors have welcomed the rise of short-term accommodation websites, such as the very popular Airbnb, which has eliminated some of the gatekeepers associated with the short-stay accommodation industry. Airbnb, and short-stay accommodation websites that operate with a similar business model, have allowed people with rooms or entire properties to let, to deal directly with people wanting to rent.

Short-Term Accommodation Market a Growing Source of Revenue for Property Investors

Property investors have now been able to access an entire market which has previously been much harder and costlier to reach. Airbnb doesn’t yet capture specific data on revenues generated by Australian landlords, however according to Australian Property Investor Magazine, there has been a noticeable trend toward short-stay rentals growing as a new source of income for Australian property investors.

Ben Kingsley from the Property Investment Professionals of Australia, speaking to Australian Property Investor Magazine, says that there is evidence that some landlords are offering their properties for short stays rather than long-term rentals as a way to boost returns. He cautions, however, that it is not for everyone and there can be significant expenses for landlords in bringing properties up to the higher standards the accommodation market demands.

“These share accommodation platforms make it easier for landlords to test the water and gauge whether there is a market for them. It is not a decision to take lightly as they will need to fit-out their properties with furniture, however, in some inner-city locations it could work.”

Community and Government Concerns Raise the Possibility of Regulation

However, the growing popularity of short-stay accommodation websites like Airbnb has been blamed for being one cause of the seemingly ever-increasing prices of residential real estate, not only in Australia but across the world. In fact, in many parts of the world, local governments are cracking down on the short-stay accommodation market because of its links to increasing property prices both for renters and buyers.

According to an article on theguardian.com, in December 2016, Airbnb has seen increasing scrutiny by local governments across the world in such places as San Francisco, New York, Berlin, Barcelona, and London. In Berlin, for example, a special permit must be sought to allow property owners to use their properties for short-term accommodation rental. These measures are designed to limit the extent of short-term property rentals eating into the availability of properties for long-term rental. It is an issue affecting entire communities.

Although this is yet to become a serious issue in Australia, federal and state governments are under increasing pressure to be seen to be doing something about housing affordability issues in our cities and suburbs. Governments are paying attention to this and are carefully examining the experience in other cities around the world. They see the short-term stay market as a threat to community stability and having the potential to make property markets tighter, affecting everyone.

For this reason, many experts are recommending investors tread carefully as Australian landlords risk having their short-term accommodation letting activities heavily curtailed in the future. It is forecast that the most affected by any new legislative changes regulating the short-term rentals market will be those letting out entire apartments or houses.

Industry Statistics Indicate Most Landlords Let Properties Only Occasionally

Industry players, such as Airbnb, argue that the majority of its Australian hosts are, in fact, only renting out their primary properties occasionally throughout the year. Airbnb says the average is only about 51 nights of accommodation each year. This is supported by a study conducted by the consulting group, BIS Shrapnel, in 2013 which found that the majority of Airbnb hosts only occasionally share their home and use any money they earned to help pay household bills.

This is a difficult question to resolve and is understandably capturing the attention of governments around the nation, who, on one hand want to encourage investment in property so long-term housing needs can be met, yet also need to ensure communities aren’t wrecked in the process. As property investors start to become more educated about this sector of the property market it may only grow as an important source of income for investors.

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