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11 Jan 19


Although it may feel like the sharing economy is still new, the reality is that ride and home-sharing companies, like Uber and Airbnb, have been around for close to a decade. The uptake of these services started with a slower burn in Australia than elsewhere, but today they have well and truly taken off and landlords all over the country are smelling the dollars and reassessing their options. Airbnb seems almost too good to be true, with some properties earning the equivalent of their monthly rental in a 1 week Airbnb booking. The flexibility offered is also appealing – with landlords being able to choose to use the space as they wish, whenever they want; when friends or family come to visit, or when they want to do repairs or renovations, the apartment can simply be blocked out on the Airbnb calendar for the preferred dates.


However, there is a downside and though it has not yet burst, the Airbnb bubble has definitely developed a slow leak in recent times. According to their press, Airbnb have almost 5 million listings worldwide, in over 191 countries. Millions of people check in to Airbnb properties across the globe every day and the impact of this on local economies has not gone unnoticed. Initially the disruption was to local accommodation providers, then to local neighbourhoods, as the sound of suitcases trundling down the pavement at all hours of the day and night became as common as birdsong. In recent years though, the problems have run deeper, with governments in numerous cities from New York, San Francisco and Vancouver, to Barcelona, Berlin and Paris all bringing in regulations to restrict Airbnb activity. Airbnb’s impact on housing affordability, as rents increased and property prices were nudged ever higher, could no longer be ignored.


What about the restrictions on Airbnb? 


According to the website Inside Airbnb, there are currently almost 33,000 listings in Sydney, over 20,400 listings in Melbourne and 4,600 in Tasmania (figures for other cities not yet available); many of which to date have been abiding by rules set by local councils, which of course vary from postcode to postcode, making it confusing for hosts and guests alike. There is a requirement for a somewhat bespoke approach at this stage as each location’s needs differ and holiday homes in beachside villages for example, should not have to conform to the same restrictions that inner city residential blocks may need. 


Some of the restrictions have borrowed from foreign strategies that have been successful in other cities, such as requiring that property owners obtain a licence, or that they register as a holiday rental business, or by applying a cap to the number of annual bookings that can be taken. Victoria has explored both of these ideas, for properties taking bookings for over 90 days per year, as well as the possibility of compensation payments to neighbours and fines for owners of properties where disruptive activities are reported. The Tasmanian government took a different approach in April, by offering home owners a $13,000 payment if they chose long term leases for low income tenants, in an attempt to curb the state’s growing housing affordability crisis. NSW has also implemented a 180-day cap in high population urban areas such as Sydney, Wollongong and Newcastle, but none in regional areas. Strata corporations have also been given the right to ban Airbnb in their buildings.


Some regional areas have experienced significant noise issues from parties, disruption and destruction caused by short stay tenants in Airbnb properties. There, residents are calling for specific holiday codes of conduct from local councils, including party bans, limitations on numbers of vehicles per property and a 10 pm to 8 am curfew on outdoor spaces and visitors.  


Airbnb do offer responsible hosting guidelines on their website, however in summary they basically tell you to do your research elsewhere – evidence no doubt of the ever-changing landscape on these issues from state to state. 


The practical challenges of Airbnb


In addition to the legalities of using Airbnb, there are also practical elements that should not be overlooked. Though the income earned on your investment might be significantly more, the investment in time and maintenance required to run an Airbnb property is also considerably higher, plus, you can’t be sure you’ll achieve high enough levels of year-round occupancy to exceed the income produced by normal long-term renting. The Airbnb App aims to make the booking and check-in process as smooth as possible, however logistics such as delayed flights, Wi-Fi not working and the general confusion that comes with being a tired foreigner trying to access a property, are all things that need to be dealt with immediately by you, the host; usually at all hours of the day and night. The wear and tear on your property is also increased due to a higher volume of traffic through your property and varying levels of care applied, by what can be a real mixed bag of guests. If your property is part of an apartment building, you (or worse, your guests) will inevitably deal with angry neighbours or disgruntled body corporate members at some point too.           


Becoming an Airbnb host is certainly an option for those with a suitable property and the desire to boost their personal income. Large family homes with unused spare rooms and bathrooms can certainly benefit, or home owners with a granny flat or studio in the backyard that could be rented here and there to help out with the mortgage. The time periods and frequency of bookings is up to you and as long as you are committed to basically running a small hotel – from time spent attending to guests, to constantly washing sheets and towels – it can be a good part time venture under the right circumstances. There are tax considerations that should not be forgotten, because you would be increasing your income as well as changing how the tax office views your property. You’ll need to keep comprehensive records of your Airbnb income and expenses and understand how capital gains tax may come into play for you when you decide to sell your home.   


As an investment strategy, sadly Airbnb falls short. Though there may be the perception of a constant stream of guests, there will always be lulls and if you have regular mortgage payments to cover you may find yourself falling short more often than not. Though more legal protections and restrictions are coming into play, Airbnb type arrangements are still largely unregulated, so government responses tend to be reactionary rather than strategic. Whatever is in place today may have completely changed in 6 months’ time leaving your grand plans in tatters. With all of this in mind, the value of property management cannot be underestimated. When you have a long-term lease in place, your property manager will take care of your one set of tenants, who (in theory) care about the property more than guests staying for just a few days. Repairs or maintenance requests are managed within normal parameters, rather than reactively because your guests need the attention within the short duration of their stay. In summary, the complications involved with being an Airbnb host fair outweigh the advantages. The value of a traditional rental property that is well managed by your agent offers a peace of mind that cannot be replaced.

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