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A new study has revealed how the explosion of short-term holiday lets has had an outsized impact on the ability to find a rental in some Australian communities.
It’s been more than a decade since short-term rental (STR) sites like Airbnb came onto the market, ostensibly to offer home owners a way to make a little money from spare rooms or temporary vacancies during vacation. But before long, the majority of listings came to be operated by owners of properties looking to rent out the entire home to visitors and tourists for a majority of the year.
Since that time, the impact of the proliferation of STRs on the long-term rental (LTR) market has been greatly debated. One new study from not-for-profit organisation Grounded, which seeks to promote the development of community land trusts in Australia, has zeroed in on how apps like Airbnb and Stayz have impacted tourist towns in particular.
The organisation analysed 13 tourism markets in Australia with a particular focus on how the rental market has changed over the past 10 years.
While studies backed by the likes of Airbnb indicate that STRs only account for 5.7 per cent of the dwellings in these communities, Grounded argues that the figure obscures the true impact. Instead, the firm looked into the ratio of STRs to LTRs, finding that across the 13 hotspots, which include tourist meccas such as Noosa Heads, Byron Bay and the Whitsundays, STRs equal approximately 34.6 per cent of the LTR supply pool.
In towns such Apollo Bay, a popular stop on the Great Ocean Road, the rental market was greatly skewed towards holiday lets, with STRs equating to 222.7 per cent of LTRs, and STR owners making a net rent of $36,205 per rental per year.
Noosa Heads has a similar proportion at 209 per cent and owners making a whopping $80,470 per rental. In Port Douglas - Craiglie, it sits at 135.5 per cent and a $51,610 net gain. In Warburton in the Yarra Valley, it’s a similar story, with the STR pool 125.5 per cent of the LTR pool, bringing in a profit of $27,430 per property.
Furthermore, the organisation reported that STR investor returns were 80.9 per cent above LTR returns, which it described as “a hefty investment dividend that can only signal future growth in STRs – particularly in tier 1 tourism towns”.
In communities like Byron Bay, where the proliferation of STRs has been well-documented, Grounded found that STRs equated to 76.2 per cent of LTRs, and that owners made an average net profit of $72,150.
That might all be about to change, though, as Byron Shire is soon to enact a 60-day cap on the rental of homes on the short-term market in an attempt to convert properties back to long-term leases. The new rules are set to take effect in September.
While Grounded acknowledged that rules such as those about to come into play in Byron might have some market impact, the organisation flagged some potential consequences that might cause the rule to have a somewhat uneven effect.
“We feel this cap will still favour larger ‘party’ sized STRs hired out for weddings and the like. That means the rental supply will be lacking for family-sized homes. It also does little to share the $585m bounty yielded by the STR cohort. It may even incentivise STRs to further increase prices,” the report stated.
Instead, Grounded is pushing for what it calls a “cap and trade” system, whereby licences for operating STRs will be issued for two-year periods, with the number issued reduced every two years until LTR supply returns to “near to where it was circa 2010–12, relative to population growth”.
To reobtain the zoning right to operate an STR, the owner will have to bid for an available licence. Under such a system, the number of licences will reduce by 10 per cent biennially and due to their increasing scarcity, the value of a licence will increase over time.
As a result, Grounded believes that “the licence value would likely lift until the net outcome for STR operators was closer to those of LTR returns. The opportunity cost would be comparatively similar at the completion of the transition”.
Ultimately, the body is calling for urgent regulation of the STR sector, and for governments to “recognise that housing investment will head towards the market with the greatest rate of return. That includes STR”.
ABOUT THE AUTHOR
Juliet Helmke
Based in Sydney, Juliet Helmke has a broad range of reporting and editorial experience across the areas of business, technology, entertainment and the arts. She was formerly Senior Editor at The New York Observer.
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