Sydney rents: Influx of short-stay accommodation puts downward pressure on longer-term rent prices

Landlords of short-stay rentals in the heart of Sydney that once fetched hundreds of dollars a night have been forced to return them to the long-term rental market amid the pandemic, with the supply glut slashing prices for locals.

Some owners of traditional rental properties are renovating dated listings to compete better with the influx of immaculate, hotel-style listings, agents said.

Thousands of available short-stay listings in Greater Sydney were shed over the year to December, according to data from short-term rental analytics firm AirDNA.

More than 20,300 short-term listings were available in December 2019, falling to under 11,400 a year later.

There were fewer than 800 available listings in both the CBD and Bondi in December, from some 1700 and 1200 respectively a year ago.

It comes as long-term asking rents in the city and eastern suburbs, popular areas among tourists and students and saturated with short-term accommodation, have been hard hit. The pandemic prompted a rise in unemployment and a dearth of international students and tourists, as well as an influx of empty holiday accommodation into the long-term rental market.

Asking rents in Millers Point recorded a staggering 30.5 per cent reduction in the median asking rent to $695 a week in the year to December, the latest Domain Rent Report  shows.

Sydney CBD, Pyrmont, Haymarket and Chippendale all recorded drops of more than 15 per cent. Bondi units fell 7.1 per cent.

Belle Property Pyrmont agent Alex Tinsley was working in Bondi and across the eastern suburbs when the pandemic first hit last year.

He said there was a sudden influx of short-term rentals to the local rental market as international students and tourists returned home in droves, driving down rents and raising vacancy rates.

“Our days on market doubled, prices came down and landlords were missing their mortgage payment,” Mr Tinsley said.

As short-term lets were abandoned by tourists, so too were long-term rentals by locals looking for better deals with landlords desperate to lease them out at almost any cost.

The sudden addition of expensive short-term rentals in immaculate, hotel-like condition was presenting another challenge for landlords of long-term properties, according to Ozway Realty principal Barry Liddle.

“When tenants were scrolling online, they were comparing long-term rentals to mini-hotels,” Mr Liddle said.

“The prices were better than the prices of a grungy apartment.

“We had a lot of people switching to these hotel-looking apartments that were ex-Airbnb, leaving properties that were neglected for years languishing.

“That put pressure on landlords to go ahead and renovate and compete with the Airbnb properties now on the long-term market.”

Executive professionals, IT workers and even workers in the health and hospitality industries were moving into these properties, upgrading their lifestyle while saving on rent, Mr Liddle said.

Gabriel Sarajinsky, founder of Airbnb property management company, HomeHost, which manages over 120 properties throughout Sydney and Byron Bay, has used a combination of short-term rental platforms and long-term leasing to fill vacant properties.

“We did whatever we could to try and fill these properties for our owners and, come around November, many of our property owners decided they wanted to continue to rent out their properties through longer-term leases,” he said.

Others decided to return to short-stay as the bookings were starting to come through again, before the pre-Christmas coronavirus outbreak.

Emily Demirdonder owns four apartments in Sydney she previously leased out as short-stay rentals on Airbnb, and has used HomeHost to secure both short-stay and long-term leases since COVID hit.

“We’ve been pretty much open to anything and everything. So we’ve had people book our properties for two-night stays, as well as six-month leases, whatever it takes to get someone into the properties,” she said.

Ms Demirdonder, who runs a plumbing business in the eastern suburbs with her husband, says they have not decided how they will lease their properties in the longer term.

“The income from short-term stays is really good, but right now we’re open to anything and we might have to keep some of our properties as long-term rentals for the foreseeable future. But who knows.”

Charter Keck Cramer director Angie Zigomanis said short-term accommodation added back into the rental market exacerbated the downward pressure on rents in inner-city areas.

“The issues would have been there anyway. The short term has just exacerbated them and justified a bigger reduction in rents than otherwise would have occurred.”

Stayz Corporate Affairs Director Eacham Curry said the company experienced strong growth in bookings last years with listings predominantly located in regional locations.

Airbnb Australian head of public policy Derek Nola said hosts were focused on how they could play a role in helping to drive economic recovery within their communities.

Originally published on Domain
By Tawar Razaghi, Rachel Wells and Jack Needham