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Investors shun short-term rentals for reliable long-term assets
Investors have been favouring long-term accommodation over short-term options, seeing the latter as riskier, more labour-intensive, and less profitable.
New data found that investors nationwide have been avoiding short-term rentals (STRA), associating them with greater risk and reduced reliability than longer-term accommodation assets.
A recent survey conducted by Property Investment Professionals of Australia (PIPA) found that more than 9 in 10 property investors had no exposure to short-term rental accommodation.
The findings came as the Brisbane City Council planned reforms to ban investors in low-density suburbs from operating short-term rentals, such as Airbnb and Stayz.
From June next year, about 500 home owners will be prohibited from renting out properties as STRA, in the council’s bid to free up more homes for the long-term rental market.
The Annual Investor Sentiment Survey, which canvassed the views of more than 850 investors, found 92.1 per cent had no properties rented as STRA, while just 1.7 per cent of those who purchased in the past year intended those properties for STRA.
Among investors’ reasons for avoiding STRA properties were the increased risk, additional work, and reduced reliability compared to traditional long-term rental assets.
When questioned about returns, just 22.1 per cent of investors said they STRA to deliver better returns than long-term rentals, while 48.3 per cent were unsure.
Meanwhile, 87 per cent of respondents said they had never rented out a property as an STRA over the past five years, which PIPA said showed they had a negligible role in serious investment strategies.
PIPA chair Cate Bakos said the results showed the pragmatism of investors, who were already under pressure from rising compliance costs, tenancy reforms, and increased land taxes.
She said STRA properties were generally viewed as unpredictable and unappealing to those seeking to build serious wealth, with holiday-home locations often considered speculative rather than strategic.
“Investors are telling us loud and clear that they want to contribute to the long-term rental pool, not chase short-term gains,” she said.
“STRA properties may look attractive because of their high nightly rental rates, but they generally don’t align with the fundamentals that underpin successful property investment.”
More broadly, the survey also found that property investors believed Melbourne (40.7 per cent) was the best city to invest in over the next year, followed by Brisbane (16.5 per cent) and Perth (9.2 per cent).
Respondents said long-term capital growth prospects (70.3 per cent), low vacancy rates (41.5 per cent), and major infrastructure spending (37.1 per cent) were key drivers for the cities.
Bakos said the survey showed most investors were committed to providing stable, long-term housing and, with the right government support, could play an important role in easing rental pressures.
“However, if governments want to encourage more rental supply, they need to support investors in the long-term residential sector rather than burden them with additional costs and restrictions,” she concluded.