By Jimmy Thomson
Rents in Sydney’s hottest Airbnb hotspots are soaring by up to five times as much as city averages, an analysis of housing costs reveals.
And ordinary tenants are being driven out of some of the city’s formerly renter-friendly suburbs as landlords switch from residential rentals to holiday lets, according to real estate professionals, backed by a Sydney University report.
“Rents are a lot higher now in Darlinghurst and vacancies are lower and a lot of that is to do with Airbnb,” says Dominic D’Ettore, principal of D’Ettore Real Estate.
“A lot of owners are now furnishing their places and renting them out on Airbnb, spending money to buy everything from cutlery to bedsheets, and say they’re getting $300 a day instead of maybe $1000 a week with a residential tenancy. They’re doubling their money.”
In Darlinghurst, where Airbnb activity is highest for Sydney, median house rents are $950 a week, a rise of 36 per cent in the six years that the online holiday rental company has been active in Sydney.
That’s almost most three times the rise of 12.8 per cent for Greater Sydney as a whole. In Newtown, another area popular with renters, house rents are up 30 per cent and unit rents are up almost 37 per cent over the same period.
“It’s getting quite common now,” says Mr D’Ettore. “Now we’re seeing a lot of investors buying and they’re immediately saying they’ll do Airbnb. It’s getting around with word of mouth.”
Agencies like HeyTom, MadeComfy and Airtasker provide cleaning and key services which mean that, contrary to the “home-sharing” image Airbnb projects, short-stay hosts never have to meet their guests if they choose not to. Independent website InsideAirbnb.com claims more than 60 per cent of Sydney airbnb listings are for whole homes rather than spare rooms.
The Darlinghurst experience correlates with a Sydney University report issued this week that shows landlords are switching from residential lets to holiday lets because the potential returns are much higher.
A paper by professors Nicole Gurran and Peter Phibbs of the university’s Urban Housing Lab claims that Airbnb appears to be absorbing vacant rental supply in popular inner-city suburbs.
“The amount of Airbnb stock in suburbs like Bondi Junction and Surry Hills seems to be actually higher than the rental vacancies available at any one time,” Professor Gurran told the Financial Review. “Airbnb listings are competing with permanent rental supply.”
According to Domain group statistics, areas identified earlier this year as holiday let hotspots, show well above average increases in rents since Airbnb and other online holiday letting agencies have taken off in Sydney. At the same time vacancies in some areas have fallen by around 15 per cent, despite going up 40 per cent across greater Sydney.
In Bondi, median house rents have gone up 58 percent to $1265 a week and unit rents 28 per cent to $670 per week, as against 13 per cent ($530) and 21 percent ($520) respectively for the city as a whole.
Meanwhile vacancy rates for houses have gone down 18 per cent for houses and up only 15 percent for units, compared to city-wide increases in vacancy rates of more than 40 per cent.
In Manly the differences are even more stark with median house rents having risen by 62 per cent ($1350) and unit rents up 39 per cent ($750), while vacancy rates for both types of home have dropped 15 per cent.
In Coogee house rents are up 38 per cent, with unit rents up 28 percent, while vacancy rates have fallen 8 per cent and 2 per cent respectively. However, local real estate professionals attribute a large part of the rise to the enduring popularity of beachside suburbs both for holidays and residential.
“The higher rises in Manly and Bondi are just a reflection of demand,” says John Cunningham, President of the Real Estate Institute of NSW. “The places where people want to go on holiday are the same places where people want to live. The effect on residential rents of online agencies like airbnb and Stayz is actually quite small.”
Even so, the evidence is stacking up that online holiday letting agencies are having a profound effect on areas of inner Sydney and the Eastern suburbs formerly popular with renters. Holiday rental ‘hosts’ can make three to four times as much through short-stay lets as they do from residential rentals.
“The impact of Airbnb on particular areas adjacent to the main attractions of Sydney is a very interesting story, and the data certainly vindicates that,” says Domain Group chief economist Dr Andrew Wilson. “There’s been a significant fall in listings and higher rents in those areas. It’s a conundrum for agents and tenants looking for somewhere to rent long-term. There’s too much demand and not enough supply.”
In one statistical quirk, unit rents have not experienced the dramatic variations seen with houses but that may be because of a city-wide upsurge in apartment block building, combined with strata community resistance to short-stay letting.
“Perhaps the effect on house rents has been much more pronounced than in apartments because those apartment blocks that want to restrict short-stay letting have been doing so,” says Karen Stiles, executive officer of the peak apartment owners’ group, Owners Corporation Network.
“Strata committees I speak to have put in by-laws to prohibit this activity and remain vigilant to illegal ads which they quickly squash.”
Adrian Pisarski, executive officer of National Shelter, the non-government organisation aiming to improve housing access and affordability for people on low incomes, sees the growth of short-stay rentals as a dual problem.
“Firstly, it is taking properties out of the market that should be available for renters,” he told Domain. “Then, because they are classed as holiday homes, it pushes rents up beyond the levels where low-income tenants can afford them.”
However, Airbnb has denied that their rentals have any effect on residential rent levels in their busiest suburbs.
“None of the [Domain] data provided supports the misleading claim that Airbnb is having an effect on Sydney rental prices,” Airbnb Australia spokesman Dylan Smith told Domain. “The data references 11 eastern Sydney suburbs – omitting the hundreds of other suburbs across Sydney to suit a false claim against Airbnb.
“The average length of time an Airbnb host lists their home on our platform is just 22 nights per year in Manly, and 20 nights per year in Coogee,” Mr Smith continued. “Airbnb is succeeding for the very simple reason that our hosts – the vast majority of whom are everyday Australians – are sharing the home in which they live in order to create a supplemental income.”
However, in a briefing note, Airbnb revealed that 20 percent of their lets were not the primary residence of the hosts.
“It’s getting harder and harder for regular tenants,” says Dominic D’Ettore. “And while it’s not yet reached plague proportions, it’s just a matter of time.”