Super profits for landlords: rents rise to $131,000 per year

Short-term landlords are raking in huge profits in 13 key local authorities, with average rent reaching a shocking high of $131,000 – more than the wages of most Australians.

A new independent study by Australian organisation Grounded Community Land Trust Advocacy found that this was the median gross rent for short-term rentals in the Whitsundays – with a net rent of $85,475 – the highest of the 13 major tourism suburbs it analysed.

According to the study, short-term renters in Noosa Heads, Hepburn Shire, Mornington Peninsula, Byron Bay, Fremantle, Victor Harbor, Hobart, Coolum Beach, Port Douglas, the Whitsundays, Warburton and Apollo Bay made enormous profits, charging 80.9 percent more than long-term renters.

An Airbnb home in Sydney: New research warns that massive profits will drive out local renters as more owners switch to Airbnb and other short-term rentals. Image: Tim Hunter.

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This entire four-bedroom house in the Whitsundays can be rented for $799 per night. Image: Airbnb

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About a quarter of the Whitsunday Islands’ housing supply is exclusively short-term rentals (about 1,000 homes), and the study warns that this number will rise dramatically. This will also impact long-term renters in even more suburbs as owners switch to higher Airbnb profits.

Grounded CEO and economist Karl Fitzgerald said: “While returns for Airbnb investors are rising, local residents are struggling to find stable and affordable accommodation.”

“Any investor aware of the significantly higher returns will prefer the STR market,” the study warned. “Such a discrepancy could play a role in investors exiting the LTR market.”

Warburton in Victoria is one of the hardest hit places for local renters due to the rise in short-term rentals. Image: Supplied.

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The study analyzed 11,935 short-term rental properties in twelve suburbs. The median gross rent was $66,900 and the net rent was $43,485. About 34.6 percent of the apartments were Airbnb-type accommodations.

Noosa Heads had the second highest average short-term rental at $123,800 ($80,470 net) and Byron Bay was at $111,000 gross ($72,150 net).

Over 1,000 owners in Hepburn Shire earned an average gross profit of $64,400 and net profit of $41,865 from their Airbnbs. In Apollo Bay 409 owners earned gross profit of $55,700 and net profit of $36,205. In both communities there are more Airbnbs than long-term rentals.

On the Mornington Peninsula, there were 4,040 properties with gross rents of $82,800 and net proceeds of $53,820. In Warburton, owners made $42,200 with net rents of $27,430, with major concerns that this growth could outpace rents for residents.

In Coolum Beach, the average rent was $66,900 and net profit was $43,485. In nearby Mooloolaba, gross profit was $69,200 and net profit was $44,980. In Port Douglas-Craiglie, rent was higher at $79,400 and net profit was $51,610.

In Victor Harbor there were 419 properties with gross revenue of $49,600 and net rent of $32,240, in Fremantle $54,700 and $35,555 respectively and in Hobart $55,500 and $36,075 respectively.

This one-bedroom cabin in Red Hill South on the Mornington Peninsula is available to rent for $331.40 per night. Image: Airbnb.

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“Locals can expect future rental supply to trend towards the higher yields in STR. This limits both affordable rents and the potential for this housing supply to trickle down to first-time buyers.”

Mr Fitzgerald warned that the supply of new housing in tourist areas is now “predominantly geared towards the STR market, which is increasing pressure on the LTR market”.

They assume that 74 percent of the new housing supply in these areas will be for short-term rentals.

“Who would have thought that a new group of investors would make a traditional landlord look like an angel?”

A study by Grounded Community Land Trust Advocacy examined short-term and long-term incomes in 13 suburbs. In most suburbs, incomes were double those of local residents. Image: provided.

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This one-bedroom penthouse apartment can be rented for $521.80 per night. Image: Airbnb

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“Because housing supply is the mecca of federal and state affordability policy, our policymakers must take note that 74.2 percent of new housing supply was consumed by STRs. Much of it was taken away from existing supply, with the net effect that barely 25 percent of the new supply made a difference.”

It warned that over the decade to 2021, for every 112 homes built, 83 went to Airbnb and other short-term rental options.

In Warburton, Victoria, the supply of short-term rental housing is almost ten times the town’s total housing supply, according to the study, while the supply of long-term rental housing fell by 36 per cent over the decade to 2021. Hobart was affected, where the share of rental supply fell by 11.2 per cent over the decade to 2021. Port Douglas and Noosa Heads saw similar declines.

How Grounded Community Land Trust Advocacy believes a cap-and-trade system will help increase housing supply for longer-term rentals. Image: Supplied.

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The study proposed a cap-and-trade system to curb STR growth by limiting the number of Airbnbs and creating a license that is gradually reduced over time.

“Over time, the number of licenses decreases, putting pressure on the 48 percent of Airbnbs listed that have not been rented. This shifts supply back to the traditional housing market, giving the community room to breathe.”

He said Paris alone would receive $140 million in the first year of the emissions trading scheme, leaving Airbnb owners with a net $920 million.

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