Why Airbnb is contributing to the sharp rise in rents

More property investors are turning to short-term rental platforms like Airbnb, which is causing a decrease in available long-term rental properties and driving up rents, as revealed in a recent report by the Real Estate Institute of Australia (REIA).

According to the ‘Short Stay Accommodation‘ report by the REIA, there were 133,968 short-term accommodation (SSA) listings available in Australia during the March quarter. This number marked a 3.7% increase from the previous quarter and a significant 22.8% surge compared to the previous year.

In contrast, the REIA estimates that Australia will face a shortage of 106,000 rental properties by the next financial year. This rental crisis is largely attributed to the rise in short-stay accommodation.

REIA President Hayden Groves points out that short-stay accommodation is a major contributor to the rental housing crisis, as a significant 81.9% of short-stay listings could be converted into long-term rental properties. He noted that suitable dwellings for long-term rentals increased by 3.7% over the quarter and a substantial 26.6% over the past year. This shortage is particularly acute in the eastern coast of Australia, where there is a high demand for long-term housing.

Why Short-Term Rentals Are Gaining Popularity Among Investors and Agencies

One of the primary reasons why more property investors are opting for short-term rentals over traditional long-term rentals is the promise of higher returns, as indicated by data from the REIA.

For instance, in the March quarter, the median annual rent for a two-bedroom home in Sydney stood at $33,900. However, an investor could earn the same income in just 122 days by renting out the same property on a short-term accommodation platform. In Melbourne, the figures were similar, with a median annual rent of $27,100, achievable in just 124 days through short-term rentals.

Additionally, some real estate agencies prefer short-term rentals because they can charge higher fees, further incentivising this shift.

As Mr. Groves pointed out, both state and federal governments are grappling with the urgent need to address Australia’s severe housing shortage across all housing segments, including public, social, affordable, private rental, and homeownership. The REIA’s report aims to provide an objective and fact-based assessment of the impact of short-stay accommodation on renters, in order to formulate effective policies in collaboration with the government and short-stay accommodation providers, based on the best available evidence.

Property investment has traditionally been a successful wealth-building strategy for Australians. If you are considering purchasing an investment property and need financing, feel free to contact us to discuss your options. Book a meeting with us and we can assist you in finding the right loan.