Why Suburban Areas do Surprisingly well on Airbnb
We have an increasing number of clients deciding to list properties in geographies not commonly thought of as suited to Airbnb on Airbnb, including those in middle suburbs of Melbourne. The reasons for listing properties on Airbnb are numerous but commonly include:
1 The ability to personally use the property – which is particularly popular for clients that live outside of Melbourne or that want the property available for family or friends.
2 Greater flexibility not provided in a conventional fixed term lease, including being able to move back into the property at any time or being able to sell the property vacant. The latter has the added benefit of having the property stylishly presented and allows the property to continue generating income during a Sales campaign.
3 Higher visibility over the property, with housekeepers attending to the property after every stay – which can result in the property being cleaned and inspected multiple times per week, as opposed to a conventional tenancy that is inspected every 6 months.
4 The property is already furnished, commonly as the personal home, allowing those moving interstate or overseas for work to keep the furniture in the property (rather than placing it in storage).
Appraising properties in suburban areas for Airbnb can be notoriously hard as there are generally very few comparative properties. By way of example, St Kilda has a total number 747 full time active listings but suburban areas such as Balwyn has 11, Essendon 23 and East Bentleigh 10.
Our advice to clients in these areas is often that we expect them to earn slightly less income on Airbnb. The honest truth is that there just isn’t enough data to accurately predict performance. These clients that have generally placed more weight on the flexibility benefits and are willing to accept the risk of potentially lower income.
The results for a number of these clients however has to date been quite promising with a number significantly outperforming their performance in the traditional rental market. By way of example a 3 bedroom house in Western Melbourne has achieved $420 p.w. net of fees in comparison to $370 in traditional rent, a 3 bedroom townhouse in East Melbourne $580 p.w. in comparison to $450 in traditional rent and a 2 bedroom townhouse property in Melbourne’s North has achieved $645 in comparison to traditional rent of $550.
We also have several properties that are earning a very similar amount compared to long-term rent and a small number that are earning less (generally not more than 10%).
A quickly evolving market
Unlike the traditional rental market where rents traditionally rise steadily in line with inflation, the Airbnb market is still relatively immature and is evolving quickly.
The graph below shows the number of properties booked on Airbnb in all of metro Melbourne (including the Mornington peninsula), which has been rapidly increasing over recent years. The solid yellow bars below represent the number of nights booked and the purple line graph represent the number of properties booked. The green line is trendline which shows the number of full-time available properties increasing two fold in the space of 3 years.
Much of this growth has been in inner city and surrounding inner suburban areas (within 5km of the city), which is now almost certainly over-supplied with short-term stock, notably 1 and 2 bedroom apartments. The data in specific suburban areas is insufficient to conclusively draw any definite conclusions, but our assessment is that as the popularity of Airbnb has expanded from early adopters to the mainstream (including families and older couples), suburban properties are uniquely placed to capture this market, that generally want to be closer to visiting family or specific events (i.e. weddings).
Reducing Furniture Risk and Hassle
The primary barrier for most people considering Airbnb is the time, money and risk of furnishing the property. Considering this LongView has developed a Furniture Hire package whereby all furnishings for an Airbnb property, including initial styling and set-up, can be organised for a set weekly amount. If any furniture is damaged or worn it is LongView’s responsibility to replace these items and when you no longer need the furniture to remove it.