Is Airbnb more lucrative than traditional rentals?

By Michael Mata | 27 Jan 2017
A new study suggests that property investors in Sydney, Perth, and Melbourne could reap bigger profits by renting out their properties to guests via Airbnb than as conventional landlords.

The latest global index from Nested, a London-based online estate agent, compared how long it took to make back the value of a property via Airbnb versus the traditional rental market. The global index placed Sydney, Perth, and Melbourne among the top 50 global cities where owners could recoup more quickly via Airbnb.

A three-bedder in Sydney would take 315 months, or about 26 years, to pay back if rented out to traditional tenants. The same property would take just under seven years to pay off via Airbnb.

In Perth, it takes about 24 years as a normal landlord versus seven years as an Airbnb host to make the return on investment. As for Melbourne, it would take 25 years as a landlord versus10 years as an Airbnb host.

The data took into consideration the average 12-month price of an Airbnb rental and assumed the property would be rented out 80% of the time.

A word of caution

Before you jump on the Airbnb bandwagon, consider this caveat: Andy Krause, lecturer in property at the University of Melbourne, considers Nested’s index to be misleading.

Among other things, he questions the high 80% occupancy rate, saying such a rate would be out of the ordinary in Melbourne.

“It makes it sound like Airbnb is a better investment in all properties in all these cities and that’s simply not true,” he said.

“I think that Airbnb certainly has a peak — there’s only so many tourists and only so many that want that experience. I expect [some occupancy rates will come] down as more people are rushing into it, and the market itself will help correct a little bit of it.”

Related Stories:

Short-Term Property Leases Could Become ‘Lightly’ Regulated
Airbnb To Use Local Knowledge In Expansion Efforts

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