Unless you have been living under a very large rock, you no doubt are familiar with Airbnb. AIRDNA states that Airbnb listings in Australia have increased nearly 29% over the last year, while booked listings have increased 43%. Short-term vacation rentals are on the rise, but how does this affect the rental market as an investor?
Investors and Airbnb
As an investor, Airbnb offers an alternative solution to your standard rental income. However, as with all investments, things are not always as the seem, so let’s refine the pros and cons of Airbnb before we delve further into its impact on the Darwin market.
- Can yield a larger per night rental income.
- Most popular in the tourist meccas of capital cities. Great if you have an investment in the heart of the city. Not so great if on the outskirts or regional areas.
- Lower occupancy rates due to the nature of short-term holiday rental. Can result in cash flow issues.
- Rogue tenants have been known to list their rental on Airbnb without prior consent for the landlord.
- Higher time and cost investment for holiday rental – ie; marketing, cleaning, maintenance.
- Your home and contents insurance may not cover you for short term letting.
Airbnb in key Melbourne and Sydney Markets
As previously outlined above, the biggest impacts seen across Australia in regards to Airbnb on the rental housing market, are on those properties in high-end, tourist areas. When comparing Sydney and Melbourne with similar population, Sydney has double the number of active Airbnb listings as compared to Melbourne (Domain). In Sydney, the greatest impact on the rental market occurs in the high socioeconomic areas. In popular beachside areas such as Manly, Pittwater and Waverley, the Airbnb listings equate to 20-25% of total rental property listings. However, this large percentage is most pronounced and limited to key tourist areas with the overall impact on statewide rentals minimal.
Melbourne follows a similar trend of Airbnb’s more prevalent in high socioeconomic areas, yet not to as much of an extent, sitting at 8% of total rentals. It appears the lower end of the rental market is not affected by Airbnb listings, yet those in the highly tourist-centred areas in Sydney and Melbourne may see an impact.
Airbnb and Tax Implications
As with any investment, the income generated from Airbnb is an assessable income. With the rise of Airbnb, the ATO is on high alert for any unreported Airbnb income. You will also be liable for Capital Gains Tax when selling the property. As with long term rentals, any expenses such as internet, phone, electricity, repairs, depreciation and loan interest can be claimed as deductions at tax time.
Darwin and the Airbnb Market
In the dry season, Darwin experiences a high demand in holiday rentals where hotel prices are high and demand is high, placing short-term accommodation pressure on the region. However, looking at the existing vacant properties in Darwin, Airbnb is unlikely to have any noticeable impact to the local rental market. For those with inner city, furnished apartments or properties and are looking to dabble in Airbnb, then the dry season is the time to do it. This may be an option for owners wanting the flexibility to stay in their property if visiting Darwin, those willing to consider the associated risks for a higher investment return or for those that can budget so that high occupancy periods are a buffer for quieter times such as the wet season, where there is low or no income.
Remember, Airbnb is not for everyone. There are tools available for investors now to compare the rental yield of long-term rentals to short-term holiday rentals. So be sure to do your homework, weigh up the pros and cons and see if Airbnb is for you.