'No Fuss': Why Many Investors Prefer Airbnb Over Long-term Rentals.

Andrew Smith and Giang Nguyen say the decision to rent out their second property in Melbourne’s north through Airbnb, rather than the long-term rental market, was a “no-brainer”, given the much stronger returns. 

Airbnb hosts around the country would be weighing the same calculations as the global share accommodation giant comes under pressure from a wave of local councils cracking down on them amid a national housing crisis. 

Dr Smith, a 39-year-old scientist, and Ms Nguyen, a 37-year-old interior designer who also imports Vietnamese coffee, rent out their three-bedroom home in Reservoir for between $40 and $55 a night per bedroom, with a two-night minimum stay, netting them on average $3500 to $4000 a month. This makes up roughly 25 per cent of their household income.

The couple’s main clients are “in-betweeners”: international students struggling to find long-term accommodation after moving to Australia, or people who have moved to Victoria for a new job. 

A local real estate agent estimated the property could be leased out for $600 a week, or $2600 a month, with management fees of between 5.5 and 6.6 per cent, including GST, as well as a letting fee of one week’s rent plus GST, and advertising totalling roughly $330.

“It’s a no-brainer really,” Dr Smith told The Australian Financial Review. 

“We don’t pay agent commissions, which aren’t cheap, and we can come in and clean up, do the gardening, everything apart from opening the bedrooms, whenever we like. So, while it is a lot more work, the return on investment is much stronger.”

There are nearly 16,200 entire homes and apartments available to lease out through Airbnb in Melbourne, according to the open-source database Inside Airbnb, and several metropolitan councils are looking at incentives for landlords to shift into long-term rentals in an attempt to tackle the housing crisis.

By comparison, a total of 11,185 long-term leases were available as of July 9, according to SQM Research founder Louis Christopher, who said downward pressure on rents in Melbourne would be achieved only if rental supply reached the long-term average of roughly 15,000.

"The real answer is that we need to increase the supply of new real estate or seriously rethink our amount of immigration," Christopher said.

The Victorian Council's main mechanism for limiting short stays is the annual registration fee, which ranges from $150 at Frankston City Council to $400 at Warrnambool City Council.

With nearly 5,000 entire homes and apartments available to rent on Airbnb, Melbourne City Council said last month it wanted to crack down on Airbnb rentals, and Mayor Sally Kapp said short-term rental properties could overcome more means of lower rent housing for workers and students.

The City of Merribec (which includes Brunswick, Coburg, Faulkner, Oak Park, and Pasco Valley) has 861 Airbnb listings. Mayor Angelica Panopoulos has also said she wants to crack down on short stays.

Darebin City Council, which includes Northcote, Preston, and Reservoir, has more than 550 Airbnb listings. Councillor Gaetano Greco wants to explore options for limiting Airbnb, whether it be a registration fee, or other mechanisms used overseas such as a nightly levy payable by short-stay accommodation operators, or a yearly cap on nights leased out.

Mr Greco said he wanted councils to consider these options, as well as charging short-stay accommodation providers commercial rates, instead of residential rates, which Australian Housing and Urban Research Institute managing director Michael Fotheringham says would be most effective.

But Dr Smith and Ms Nguyen say Darebin would have to push quite hard to make it financially worthwhile. 

The couple said charging commercial rates or imposing a yearly cap on the number of nights they could lease their home out through Airbnb would be most likely to motivate them to shift, given the wide gap in rental income. Smith is not convinced this will have the expected impact on rental stock.

"It's a bit of a gamble because if they put fees like this on investors and don't give them much choice, what are they going to do? They might decide it's better to invest in another country or something completely different." he said

"Without investors, there are no tenants, one needs the other. If investors are penalized, so are tenants.

Port Phillip City Council has 2,238 complete Airbnb homes and apartments, according to Inside Airbnb, which also looks at the impact of short-term accommodation on local housing supply.

But Mayor Heather Cansulo said much of the blame for the problem lies with state government.

"Everything is on the table," Victorian Premier Daniel Andrews said in the state's full housing statement to be released in the coming months.

"More supply ... putting downward pressure on prices," Andrews said last week. 

Nguyen said Airbnb hosts should be encouraged to enter the long-term rental market, rather than penalized for renting in the short-term market.

"We already pay tax on Airbnb's income, and if we sell, we'll still have to pay capital gains tax, so raising Airbnb's listing fee would triple our income," he said.

A  Parliamentary Budget Office report showed on Monday Victorians will pay $2,120 per head in property tax in 2023-24, compared with $1,646 in New South Wales and $1,343 in Queensland.