Are short-term holiday rentals the solution to or the problem in Australia’s housing crisis?
That’s the question on many people’s lips at the moment. The answer depends on who you ask, with varying experts presenting equally diverse opinions.
Right now, two differing views are being presented in the property market – one sees short-term holiday rentals as a potential solution to those struggling to pay a mortgage, while another says more should be pushed into the long-term rental pool.
She says short-term holiday rentals, such as Airbnb, could save homeowners from the looming fixed-rate mortgage cliff.
The Reserve Bank of Australia estimates more than 800,000 loans are due to roll off fixed to variable mortgage rates this year.
Ms Porter says, for many, this will result in their mortgage repayments doubling or even tripling.
“The current environment is the worst possible mix for those locked into a fixed-rate approaching its end of life,” she says.
“Whilst the banks typically assess borrowing at a higher rate, the current interest rates are at 11-year highs so we expect to see a real squeeze on the budget as these fixed rates wear off.”
But Ms Porter believes there is a lifeline – Airbnb.
“Households struggling with new repayments are turning to Airbnb to boost their income,” she says.
“They are simply moving back in with family so they can switch their home to an Airbnb full-time, or some are doing it part-time.”
“Savvy part-time Airbnb users simply do mini-stays with family and friends or go away camping to free up peak times and maximise their revenue.”
Depending on location and the time of year, homes can attract hundreds and even thousands of dollars a night, which provides a nice retreat from mortgage repayments.
“In the permanent rental market, you will typically get three per cent net returns, but rates are close to double this, so the return doesn’t even make a dent in the repayments,” she says.
“Airbnb can achieve much higher returns for the right property and the right location, helping some people cover their whole repayments.”
Ms Porter says mortgage holders who are struggling to stay afloat should also communicate with their bank, research the possibility of a payment holiday and contact their accountant to do a crisis cash flow management plan.
She also says it’s worth having a conversation with local real estate agents to determine if you can sell for a reasonable price as some markets have held strong.
Taking a different approach in the rental market is the Real Estate Institute of Australia, which has called for property owners with vacant homes, or homes in the short-term rental pool, to consider putting them on the long-term rental market.
“We desperately need more supply into the market.
“REIA’s latest Real estate Market Facts report found that the vacancy rate for Australia’s capital cities was down to just 1.7 per cent, well below the typically balanced market of about 3.5 per cent.
“The report found that rents for a three-bedroom house increased by 1.3 per cent over the December quarter to reach $524 per week.”
Mr Groves says the REIA was inspired to call for homeowners to consider putting their vacant homes or short-term holiday rentals into the long-term rental market by Eurobodalla Shire, which recently did the same thing.
“The Eurobodalla Shire recently asked all ratepayers to do this and attracted 80 homes back into the rental pool,” he says.
“If we make a nation-wide effort that could release as many as 42,000 new rental listings into the market across the country, ahead of winter, averaged out across our 537 local governments across Australia.”
Mr Groves says there’s only a certain number of short-term holiday rentals that can be used and with winter approaching, demand for that kind of property, particularly in coastal areas, will drop.
“They’d also get a return similar to that of the long-term market,” he says.
Mr Groves says the REIA was also calling on the Federal Government to champion an audit of all state and federal government owned property to see what was not being used and could be made fit for purpose to ease the housing crisis.