Melbourne apartment buyers chase a piece of Airbnb’s $95 million market
Domain
12 November 2016

Inner city apartment investors are cashing in on Melbourne’s $95 million Airbnb obsession and shunning the private rental market, with the accommodation website poised to reach a new peak this summer.  

The first report quantifying the value of Melbourne’s Airbnb market has shown just how large a chunk the website has taken out of the traditional hotel market’s bottom line: everyday homeowners and renters pocket up to $500,000 a night across the city on peak summer evenings.

The explosive heights of last summer—where up to $14 million was turned over a month by hosts—are set to again be surpassed this year, the University of Melbourne research found.

Nearly 60 per cent of Melbourne’s listings are apartments, concentrated largely in the inner city, particularly within the CBD [Central Business District] near Southern Cross station, St Kilda, South Yarra and Port Melbourne, the report showed.

The vast majority of Melbourne’s 12,500 hosts have just one listing on the website, but local agents and developers say there is a growing trend of both mum and dad investors, who see bigger profit margins on the platform, and opportunistic tenants, illegally subletting their rentals, wanting to mine the golden age of Airbnb in Melbourne.

It is a rush to market that comes as the city continues to grapple with the regulations of the mushrooming Airbnb phenomenon, including legislative regulation that stalled in parliament this week and two landmark Supreme Court rulings earlier this year.

Listing on the platform have grown from about 3,000 in October 2014 to 17,500, analysis by Andy Krause and Gideon Aschwanden, funded by Chicago’s Real Estate Research Institute, revealed.

“It shows just how much it’s grown in just two years,” Dr Krause said. “We knew it had grown but we weren’t expecting that big a jump.”

Though the research suggests the growth rate will slow, and has seasonally slowed through winter, total summer reservations for listings this coming summer are forecast to exceed this year.

Property pundits say buyers are attracted to the much larger rental return compared to the private rental market. Wannabe hosts have rushed into boutique projects in areas such as St Kilda, South Melbourne and Prahran, according to Marshall White project director Leonard Teplin, and interstate investors are even buying sight unseen.

“They’re making more money from leasing something out on the weekend than they would all week,” Mr Teplin said. “One client in St Kilda told us they were expecting $150 a day to lease it out [through Airbnb], and the local agents told them they would be lucky to get $350 a week.”

A rise in illegal subletting by tenants, the subject of one landmark court case this year, has led agents to trawl through Airbnb to find those in breach of their lease agreements.

“We check all the time and it’s very easy to work it out,” said Hocking Stuart Melbourne director Scott McElroy, whose agency has caught out several people in the past.

A bill to regulate short stay accommodation, the first step by the state government to do so, was referred to the environment and planning committee by the upper house on Tuesday. One concern raised by the opposition was the ongoing issue of apartment residents being subject to unsavoury behaviour with little recourse to deal with the issue.

But Strata Community Australia’s general manager, Rob Beck, said the problem went even beyond the “party pad” scenario.

“Owners corporations and owner occupier residents are essentially footing the bill for all the wear and tear on the building and taking on an unreasonable fair share for the short stay operators who are making lots of money from it.”

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