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Why something isn’t adding up when it comes to vacancy rates

apartments airbnb vacancy

Something isn’t adding up with residential vacancy rates. We believe that the emergence of Airbnb as an alternative short-stay accommodation option is having a significant influence on the supply of property to long-term tenants.

Four consecutive years of high volumes of property investor transactions should result in oodles of extra rental supply. And attractive incentives to help first home buyers in NSW and Victoria would normally mean easing rental demand.

Under normal circumstances, these trends would result in vacancy rates rising significantly. But that hasn’t happened.

We have observed a similar anomaly in parts of regional Australia. And we think it’s no coincidence that the common denominator among locations with an out-of-cycle tightening of vacancy rates is tourism popularity – it’s the Airbnb effect!

Instead of adding investment properties to the traditional (long-term) rental pool for local residents, an increasing number of investors are putting their properties up for rent to short-term visitors such as tourists and business travellers.

Airlie Beach in north Queensland has seen vacancy rates plummet from 7.5% to 1.5% over the two years ending January 2018.

Other popular tourism destinations to experience a significant rental tightening include Mooloolaba (2.1% to 1.1%), Hervey Bay (3.2% to 2.8%), Cairns (2.3% to 1.8%), Orange (2.7% to 1.7%) and Torquay (2.5% to 1.3%).

In Hobart, Australia’s strongest property market by a long streak since late 2016, short-stay popularity has contributed towards skyrocketing rents. A number of clients that Propertyology helped invest in Hobart before the boom report their rental income increased by up to 25% in the past year alone.

Written by Simon Pressley

Simon Pressley

Simon Pressley is head of property market research for Propertyology.

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