Interview with Dr Asti on Australia’s Short-Term Rental Market
Last week, we caught up with property expert, Dr Diaswati (Asti) Mardiasmo. We sat down and asked her about Australia’s short-term rental market and its outlook, plus tips on purchasing and investing in property.
Dr Asti is the head of National Research Department at PRDnationwide. PRDnationwide is Australia’s leading research-backed and data-driven real estate agency. You can head over to www.prd.com.au to find out more.
Thanks for setting aside the time to speak with us. Could you please explain who PRDnationwide is and your role?
PRDnationwide has been around for forty plus years and is a residential real estate network. I am the National Research Manager, and the Head of the National Research Department. The department focuses on residential real estate trends, growth, sales, investment and development across Australia.
We cover the whole of Australia and are not limited to capital cities such as Brisbane, Sydney, Melbourne – we also include any metro and regional areas. I have the data for every suburb in Australia, and we monitor the property market condition for each suburb.
Talking about the sharing economy, how does Airbnb affect the Australian property market in general?
The thing is, a lot of people say that the Airbnb competes with the residential property market but really, that’s not the case since they are two different categories.
Airbnb is short-term commercial rental accommodation whereas the property market is a long-term investment market. Airbnb listing represents a tiny portion of the property market. For example, it is less than 1% in Sydney.
The impact of the group of real estate that only makes up less than 1% of listing in Sydney, is quite minuscule.
It is not because Airbnb is not essential, it’s because what people don’t realise is that they are two different markets offering different products. Also, they each have different regulation and type of insurance.
Instead, I think that they, the short-term rental and long-term property markets, compliment each other as supposed to compete against each other
So you’ve said that Sydney’s Airbnb only makes up less than 1% of all residential listings. Do you think or expect to see continued growth?
Yes, like how it has been growing over the years. When I said that Airbnb listing is less than 1% in Sydney, it means 1% of all the real estate listing in Sydney. So, if the number of real estate listing in Sydney have increased, and the number of Airbnb listing has increased, then the percentage of Airbnb listing will remain roughly the same.
The only time that the Airbnb listing percentage would increase is when the number of Sydney listings decreases – which is unlikely going to be case. But, it doesn’t mean that there hasn’t been growth in Airbnb’s market, it just says that in the overall Sydney real estate market, there has been an increase in the traditional housing and rental market.
Are there any differences between the popularity of short term rental in metro and regional areas?
The thing about short term rentals is that it’s very much location-dependent. We always see more spike or volume of listings in areas that are nearer to the cities/CBD. Those are areas that are very near to public transport, major events and major infrastructures such as the airport, hospital, convention and shopping centre. Additionally, you will see more listings near a large tourism base area such as beach and mountain.
What’s most important about an area is its accessibility. We have to remember that most people who use Airbnb usually visit for a holiday or short-term business. Thus, they need to be well-serviced with public transport, and we always see more listing in those areas.
Where do you see the short-term market and listings in the next ten years?
I think that Airbnb will bring more accommodation demand for a tourist location. When you have a property that is close to a tourist spot, you are not only opening that to the local and interstate customer; you are also attracting international customers.
Airbnb fills the gap for tourist accommodation in terms of price and demographic perspective.
Firstly, Airbnb is mostly more economical than a hotel or resort.
If you look at the average house for Airbnb, the average house nightly price in Sydney is around $105 whereas the average daily rate for a hotel in Sydney is $260.The average house nightly price in Brisbane is about $70 whereas a hotel is somewhere between $110 and $120.
Secondly, in terms of demographic, Airbnb appeals more to families.
For example, as a family, if you stay in a hotel, it is never going to be as spacious or flexible as having the whole house to yourselves. Airbnb allows you to experience living like a local, have the entire house to yourself – Airbnb provides space where you can relax comfortably.
Whether or not it’s a short-term phase, at the end of the day some regulations might restrict Airbnb to a certain extent. There are some reforms and legislation that may control Airbnb a little bit more. For example, NSW government recently passed the law stating that you can only have 180 days of short-term rental in a property. Moreover, strata now could allow or ban short term rental in their property. Lastly, there are some changes in the taxation law whereby Airbnb host has to declare their rental earning. Airbnb is starting to become a service provider that people are taking more seriously, so there might be more restrictive legislation coming up.
Talking about regulations that are becoming more restrictive in NSW, do you think other capital cities will follow the same structure?
I think the government will always be evolving because they are acting in the best interest of each respective areas.
NSW is often the pioneer of legislation changes while the rest will observe an see what happens. If it’s something that works well, I wouldn’t be surprised if they start to change regulation in another state. Thus, the government will have to take that into account and ensure that Airbnb is there to complement, not to cut off the other industry.
Now, let’s talk about negative gearing. It’s been in the news a lot due to the proposed Labor changes. What’s your opinion on negative gearing?
Negative gearing has been the way that Australians build their wealth for many years. For it to be abolished from the system would be a shock to everyone. You will get a lot of protest from people mainly because they wouldn’t know how to manage their property. This would then impact them financially, from a taxation perspective. However, I do understand when there’s a concern about negative gearing because it may price out first home buyers.
At the same time, our real estate market goes through a cycle; downturn, upswing. It is about reading the market as to when is a good time to enter or sell. I would say that negative gearing has helped Australians and the rental market.
Negative gearing ensures that there is an adequate amount of rental property the market and keeping rental competitive.
It also helped the residential market a builder’s and developer’s perspective because a lot of development right now is meant for investment. If negative gearing is being taken away, I think that there’s a possibility that the amount of investment and development would decrease. This would then impact the construction and building industry.
What about first-home buyers, what tips do you have?
The misconception among first home buyers is that they must have the perfect home. That’s not the case. If you look at the long line of how Australians built their wealth, most Australians made their wealth long time ago. Their first home was not their dream home and not located in a great place.
When I bought my first home, it is nowhere near my dream house as it was in an industrial area. However, it was what I could afford because I want to start building my equity and be on the track of home ownership.
Being a first home buyer is about expectations and reading the market and knowing when the market is starting to come down and invest in the right time.
What is your opinion on buying interstate property?
I have personal experience in buying interstate property.
Firstly, you should do extensive and holistic research.
Do not buy just because someone said that there’s significant growth in this area and prices have gone up. You need to look at every single angle that may impact the residential real estate market. This includes:
- Demand and supply
- Demographic changes
- Rental yield
Does the state plan to change any investment regulation that may affect you for example as a foreign investor?
What does the council have planned for that area? How many developments are they approving when it comes to residential development and is there any infrastructure, commercial and industrial development.
A lot of people forget about this, and they buy because of the growth rate. Sometimes, that may be the case but if there’s not enough infrastructure and commercial development, you’re not going to have the capital growth that you want for the next 5-10 years.
Secondly, knowing what you want the property for.
Do you want the property for long term rental where you’re going to have it as investment equity, and negatively gear the property? Or are you more interested in short-term rental? Knowing what your goal out of this investment property is essential.
Thirdly, have a local team.
Make sure that you have a strong local team that you trust and you know will do the job properly. The team would include local buyers agents, local finance brokers, local solicitors, town planner and architect. Having a local team is crucial as they are the one who fully understands the market conditions of the area.
Furthermore, when you have a local team, more likely than not, they may know each other. They can work together with other solicitors and brokers in the area, thus making your transaction smoother. This is particularly important if you can’t be there physically to have a look and inspect, you need to have that strong local team.