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Disrupting Tradition: How Short-Stay Listings Are Impacting Property Management

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The "Airbnb effect" has become a contentious talking point in the real estate and property development sectors over the last few years, with the popularity of online short-term rental sites changing the landscape for property management as more people opt for booking their rental properties online.

While these online platforms are providing a sought-after service for holiday-makers and people searching for short-term rentals, experts across various industries are conducting studies into whether or not the popular habit of renting out a property on these platforms is having a negative effect on the market.

Some of the proposed effects online short-term rentals are thought to have on local property markets is a significant contribution to the gentrification of certain areas, and a rise in real estate prices as a result of people paying more for a property in order to rent it out online.

This effect has been felt worldwide, with popular metropolises such as Dublin, Amsterdam and Barcelona claiming to have had significant numbers of local properties withdrawn from the long-term property market.

PPS Tailored Furniture Solutions managing director Marc Conias says that as investors and landlords begin to withdraw from traditional long-term rentals, there has been a marked impact on the supply of rental properties for long-term residents.

“This withdrawal has led to a negative impact on the supply and availability of residential accommodation, since it is encouraging landlords to seek to capitalise on the high returns that occur when they successfully tap into the tourist and business trades.”

Marc Conias, managing director of PPS

The popularity of short-term lettings is also showing signs in Australia’s rental market. The Sydney Morning Herald reported in 2017 that 6,000 homes had potentially been taken out of Sydney’s permanent rental housing market and listed on home-sharing websites. In April 2017, 28 per cent of Airbnb listings in Australia were entire properties.

What is a short-stay rental listing?

Online platforms such as Airbnb allow users to rent an entire home, room or a shared room for a certain amount of days, normally determined by the owner.

Many of these properties are available all year thanks to on-shore and off-shore investors, essentially reducing long-term rental options in the area.

What is driving this phenomenon?

There are a number of factors driving investors to list their properties on these short-term rental websites, but the most obvious two are decreasing lines of income and downward pressure on rental income.

In April 2017, 28 per cent of Airbnb listings in Australia were entire properties.
In April 2017, 28 per cent of Airbnb listings in Australia were entire properties.


Decreasing lines of income

As the traditionally buoyant rental market continues to decline, the dire state of property commissions has led investment groups, developers and property managers to seek out alternate streams of income.

“As the market continues to shift, property managers are now turning to short-term rentals as a more lucrative avenue for income – with some property managers now solely focusing on managing short-term rentals online for both on-shore and off-shore investors,” Conias said.

“This obvious shift toward online short-term rentals has caused an unquestionable impact on the traditional property management sector, where we’re now seeing property managers even begin setting up their own online property management and booking platforms.”

Downward pressure on rental income

Another driving force behind the shift to online short-term rentals is the ability for property investors, managers and agents to use this specific property type as a way to access loopholes in traditional planning laws and achieve greater net rental yields.

“Due to the oversupply of units and the challenge of downward pressure on traditional rental income, developers and investment groups can no longer rely on their net rental yields from the pre-sales period – making short-term rentals a more attractive choice for investors,” Conias said.

“State-by-state planning laws also offer an opportunity for investors to take advantage of the benefits of short-term rentals, with a number of investors seeing returns that are noticeably higher than traditional rental properties.”

In 2017, 6,000 homes had potentially been taken out of Sydney’s permanent rental housing market and listed on home-sharing websites.
in 2017, 6,000 homes had potentially been taken out of Sydney’s permanent rental housing market and listed on home-sharing websites.


Where is the threat?

The threat that online short-term rentals has is aimed largely at rental affordability, with the rise in short-term rentals causing property owners and investors to withdraw completely from the long-term rental market.

“By withdrawing from the long-term rental market, and leasing exclusively to tourists and short-term visitors, it directly impacts on a locations rental prices and housing availability for long-term renters and residents,” Conias said.

“This phenomenon has begun to surface in popular holiday destinations like Byron Bay, where long-term residents are beginning to be pushed out of the rental market as landlords chase the lucrative option of short-term holiday letting.”

The University of Sydney have begun conducting studies into the influence of a "sharing economy" and have found that the effects on future markets could be profound.

“If we continue down a path where there is a light touch to regulation around short-term lettings, what we might see is some perverse outcomes and impacts on the long term rental market,” Professor Chris Pettit told ABC News in June, 2017.

What impacts have we already begun seeing?

Although short-term rentals are yet to make as big of an impact on the Australian market as they have internationally, there are a number of changes that have already begun taking place – most notably with the way new residential developments are approached by investors, developers, property managers and management rights owners.

“As a result of the factors behind the rise of short-term letting, we have seen a strong shift in incentivised furniture packages from the front end or pre-sales of a project to more short-term requirements. The demand for furniture packages in the early stage of a development has naturally declined due to a strong drop in the launch of residential developments.”

Marc Conias, managing director of PPS

“The traditional contract between the developer and property manager is also being tested as the number of expected units in the rental pool is not being reached. This also goes further into the sale of management rights, where the purchase price for a property’s management rights is being diluted by short-term rentals.

“We have experienced a double disruption, with both investment groups and home-sharing platforms changing the landscape of how they are doing business and becoming more creative with their future revenue streams.”


The Urban Developer is proud to partner with PPS Tailored Furniture Solutions to deliver this article to you. In doing so, we can continue to publish our free daily news, information, insights and opinion to you, our valued readers.

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Article originally posted at: https://theurbandeveloper.com/articles/disrupting-tradition-how-short-stay-listings-are-impacting-property-management-