Rents drop as Airbnb flats return to residential lets

The pandemic hasn’t quite killed off short-term holiday letting but it’s certainly applied a hefty brake – at least as far as our cities are concerned.

The return to the residential letting market of large numbers of apartments that were until recently listed as holiday rentals has been good news for tenants in some areas.

According to a report in Domain, by Flat Chat’s Sue Williams, apartments in Sydney’s very central Millers Point have seen rents drop by more than 25 per cent due to falling demand.

This is probably due to recession-hit families bunkering down together, while former short-term holiday rental (STHL) flats flood the market, writes Sue.

Ironically, says the same report, rents have risen by similar amounts in leisure-friendly suburbs like Dover Heights and Sydney’s Northern Beaches due to increased demand from home-working refugees who no longer need to be near their offices.

Melbourne and surrounds

In Melbourne, according to figures released by SQM Research, the drop has been less dramatic with the average asking rent for all units down 9 per cent, from a record of $424 a week in March to $386 this month.

And it’s not just seasonal – the same period last year saw unit rents average $408, or almost 6 per cent more.

Meanwhile, in Mornington, rents for three-bedroom houses shot up 34 per cent, in a recent week, while units there are up 17 percent since March and 19 per cent on the same period last year.

The extended lockdown in Melbourne may have delayed the full effects as witnessed in Sydney, but those figures confirm that there has been a hollowing out of our two largest cities.

Staycations

Meanwhile, far outside the CBDs, holiday rentals in some areas are booming. Given our less than zero chances that we can take a holiday overseas any time this year and possibly next, many ‘staycation’ destinations in our states are booked to the brim.

And with cross-border and internal travel restrictions gradually being lifted, as a nation we are hitting the internet, looking for somewhere … anywhere, that isn’t home.

It’s a much-need boost to rural economies and the STHL spin doctors, who rarely miss a trick, are even claiming that taking a break in a property that you have all to yourselves is so much more Covid-safe than checking into hotels.

It’s an over-sell. Beach houses and flats, country town motels and caravan parks, and boozy weeks in wine areas, all have their own appeal and these local post-lockdown destinations are both rediscovered holiday alternatives and a much-needed salve for itchy feet.

Given that it sounds like Sydney’s fireworks display this year will be something of a damp squib, and half our hotels are full of quarantined returnees from overseas, it’s going to be a relatively restful festive season in our cities.

Airbnb ‘booked’

Meanwhile, the fact that tenants are leveraging empty former short-term rental flats to get lower rents in our city centres provides proof, if ever it was needed, that Airbnb and its ilk forces rents up in (and locals out of) popular city areas.

And it confirms the central thesis of a new book by two American academics.

Airbnb, Short-Term Rentals and the Future of Housing examines the effect of holiday lets on rental communities globally, and has a whole section devoted to Australia, claiming we are one of the least regulated countries in the world when it comes to STHL.

The authors argue that the most disruptive impact of Airbnb and short-term rentals has been in urban centres where housing markets are stressed, exacerbated by Airbnb’s tight control over access to critical data.

That’s as may be, but raw data can only tell you so much. As city centre rents plummet, we are reminded that PR talks but money walks.

You can read more about the book HERE.

A version of this column first appeared in the Australian Financial Review.