With the real estate industry being impacted by the changes of the global Covid-19 pandemic, AirBNB and short stay holiday rentals have taken a significant hit. University of Queensland’s Thomas Sigler, studied the Airbnb market, finding at any given month prior to the pandemic, Australia had between 100,000 and 130,000 dwellings listed as AirBNBs, with listings growing by around 2-3 per cent per month. However, according to analytics firm AirDNA, new bookings in Australia declined by more than 75 per cent as the social distancing restrictions were brought in, with bookings dropping from 84,000 at the start of March to just 19,000 in mid-April. While the AirBNB market has declined in the wake of the Covid-19 pandemic, should you be moving your Airbnb back to long term rental?
Why you should move your AirBNB back to long term rental
Cities across the country are feeling the effects of fewer international students and workers looking for accommodation. With no international tourism likely in the coming months and domestic tourism down due to social distancing rules and state and territory border closures, the demand for AirBNB and short term holiday rentals has fallen significantly. As a result, some of these properties have already joined the market for regular, long term rental.
Converting your AirBNB property to a long term rental gives you the opportunity to earn a steady stream of income on the property while the tourism industry recovers from the pandemic. In addition, long term rentals don’t require the frequent cleaning between guests, hospitality as a host, or reliance on positive reviews that AirBNBs do. With a long term rental, you will also only have to do maintenance on the property when something needs repairing.
What does the long term rental market currently look like?
CoreLogic head of research Tim Lawless, told ABC news that rental pressures had remained modest across most of Australia with the national rental index measuring 1.2 per cent higher over the March quarter. However, the market is expecting downward pressures on rent moving forward as a result of a rental oversupply.
Realestate.com.au reports that compared to this time last year, rental listings on its platform are up 8 per cent across the country. The biggest increase in listings are in New South Wales, Victoria and Tasmania. However, Western Australia has the largest decline in listings. Domain also reports a 10 per cent increase nationally between March 30 and April 26, compared to a year ago. Domain’s Sydney and Melbourne listings are up 19 per cent, Hobart listings are up 24 per cent, but Perth listings have fallen 10 per cent.
SQM Research also expects a surplus of an estimated 100,000 house and apartment dwellings this year as the construction industry continues moving forward despite other industries being shut down in the wake of the Covid-19 pandemic. This could lead to a doubling of rental vacancies nationally.
Will my rent income change by going long term?
With an increase in long term rental listings on the market nationally, tenants can shop around for more affordable rent prices. A combination of an abundance of new apartment listings, restrictions on viewings and banned open houses, and fewer people looking to move during the pandemic are also putting extra pressure on property owners to reduce their price expectations.
The latest figures from SQM Research show national asking rents fell in the past month, down 2.4 per cent for houses and 1.1 per cent for units. In Sydney, rents for houses declined 5 per cent, Hobart fell 4.2 per cent, and Melbourne rents dropped 2.6 per cent. While you will see a short term reduction in rent by moving your AirBNB to a long term rental because of the increased supply on the market, the medium to long term outlook is much more promising as you’ll receive steady income from a stable tenant, regardless of the season and trends in travel.
What are tenants looking for at the moment?
As rental vacancies are forecast to rise nationally due to the Covid-19 pandemic’s impact on the real estate market, particularly in major capital cities such as Sydney and Melbourne, the increased supply outweighs the demand. Many Australians have suffered losses to their income due to social distancing restrictions and lockdown measures put in place to prevent the spread of the Coronavirus. As many Australians try to save money there are fewer people looking to move out. Immigration has also fallen as there are fewer international students and workers looking to rent.
Those who are looking are downsizing and consolidating to save money. To help attract tenants looking in a flooded market, you might need to consider making flexible lease terms, meeting the middle ground between short and long term leases, keeping your property furnished or semi-furnished, and be willing to reduce your rent prices.
While the AirBNB market will need to wait for the tourism industry to recover from the Covid-19 pandemic to bounce back in short term rental interest, your property doesn’t need to sit vacant. Speak to your agent today about moving your Airbnb back to long term rental.