A recent study highlights the significant impact of short-term holiday rentals on the availability of long-term rental properties across various Australian communities.
Over the past decade, platforms like Airbnb have transformed the rental landscape. Initially, these services provided homeowners with a means to earn extra income by renting out spare rooms or temporary vacancies. However, it quickly became apparent that many listings were dominated by property owners leasing entire homes to tourists for most of the year.
The debate over the impact of short-term rentals (STRs) on long-term rental (LTR) markets has intensified. Grounded, a non-profit organization advocating for community land trusts in Australia, has recently examined the influence of STR platforms such as Airbnb and Stayz on rental markets in tourist areas.
Grounded analyzed 13 tourism markets across Australia, focusing on changes in the rental landscape over the past decade. While Airbnb and similar companies claim that STRs represent only 5.7 percent of properties in these communities, Grounded’s findings suggest a far greater impact. Their research indicates that STRs make up about 34.6 percent of the LTR supply in these 13 popular destinations, including Noosa Heads, Byron Bay, and the Whitsundays.
In some locations, such as Apollo Bay on the Great Ocean Road, the rental market is overwhelmingly dominated by holiday lets. In Apollo Bay, STRs account for 222.7 percent of the LTR market, with owners earning an average of $36,205 per property per year. Similarly, Noosa Heads has STRs comprising 209 percent of the LTR market, generating an average of $80,470 per rental. Port Douglas – Craiglie sees STRs representing 135.5 percent of the LTR market with a net gain of $51,610, while Warburton in the Yarra Valley has STRs at 125.5 percent of the LTR market, bringing in $27,430 per property.
The study also reveals that STR investors earn 80.9 percent more than their LTR counterparts, indicating that STRs, especially in major tourist towns, are likely to continue expanding.
In Byron Bay, known for its high concentration of STRs, the study found that STRs account for 76.2 percent of the LTR market, with an average net profit of $72,150 per property.
Changes may be on the horizon, however. Byron Shire is set to introduce a 60-day cap on short-term rentals, aiming to shift properties back to long-term leases starting in September. Although Grounded recognizes the potential impact of this regulation, they warn that its effects may be uneven.
Grounded warns that the cap could still benefit larger STRs used for events like weddings, potentially leaving a gap in family-sized long-term rentals. The cap might not effectively address the $585 million generated by the STR sector and could even spur further price hikes.
Instead, Grounded proposes a “cap and trade” system, where STR licenses would be issued for two-year terms, with the number of licenses decreasing every two years until LTR supply returns to levels comparable to 2010-2012, adjusted for population growth. Under this system, STR operators would need to bid for available licenses, with a 10 percent reduction in the number of licenses every two years driving up their value over time.
Grounded believes this approach would better align STR returns with those of LTRs, making the opportunity cost between the two markets more equitable. The organization is calling for immediate regulation of the STR sector and urges governments to recognize that investment will flow toward the market offering the highest returns, including STRs.
