Coronavirus hasn’t quite killed Airbnb and its ilk but it’s certainly given the Australian short-term rental market a severe headache and a nasty dose of the shivers.
Investors running scared from volatile shares might be better advised to put money into furniture recycling and removals than short-term holiday lets, as furnished flats are cleared out and released back into the residential market.
To be scrupulously fair, it’s a mixed picture. A recent report in Domain in the Sydney Morning Herald has revealed a massive drop in apartment rents in some areas of inner-city Sydney and, counter-intuitively, huge rises in rents in traditional “staycation” holiday areas.
It’s all about the pandemic which, as we know, has hit incomes at home and abroad and, as the tourist trade dried up, the viral spread of holiday lets has not just been halted, but slammed into reverse.
With renters unwilling or unable to pay inflated inner-city rents and a surge of former holiday let apartments released on to the market, tenants coming to the end of their leases have been able to negotiate lower rents or move to more attractive properties in better areas for less money.
The fact that large numbers of overseas students aren’t competing for apartments has also taken the heat out of the unit rental market in both Sydney and Melbourne with quarterly drops in in average rents of about 4 per cent, according to this report.
That story also reveals that Tasmania, with its “come on down” conversion of homes into holiday lets, has suffered most with an 8 per cent fall in unit rents, over the quarter.
But it’s not all a downward spiral. The combination of remote working, home schooling, lay-offs and enforced leisure time has seen an increase in families who can afford it taking long leases on what might have previously been beachside weekenders.
If you’re going to be stuck at home for three or four months it may as well be somewhere you enjoy. How else can you explain house rent rises over the year of almost 30 per cent in areas like Palm Beach when inner city rents have dropped by between 15 and 30 per cent?
That said, the property pictured at the top of this story – a five bed house on Palm Beach – is available for $15-25k a week. Have a look for yourself and dream.
The reasons are less obvious why apartment rents in areas like Glenfield have shot up. Being sandwiched between parkland and the Covid-hit Crossroads Hotel in Casula must have had some attractions.
Meanwhile, if you are thinking of getting into holiday lets in the future by taking advantage of falling apartment prices now, have a think about what shape that future might take.
In NSW, the long-delayed code of conduct for holiday lets is yet to be revealed. The fact that the industry is now calling for the code to be released suggests the original proposals may have been watered down more than communion wine.
As for any hopes of a recovery in overseas tourism, the American election is going resolve nothing, regardless of who wins. It will either be a different kind of chaos or more of the same.
China is ramping up the rhetoric about how bad Australia is and Europe and India are walking their own tightropes between opening their economies while trying to suppress the virus. None of these peoples are going to be flooding the arrivals halls of our airports any time soon.
Obviously, while we are all stuck here, local tourism is going to keep the industry afloat, if anything can.
So maybe our collective focus should be on making Australia a better place to be, rather than a hard place for renters to live.
A version of this post first appeared in the Australian Financial Review.