Investors increasingly favour long-term rentals over short-term options

In a notable shift within the Australian property market, investors are increasingly turning away from short-term rental accommodations (STRA) in favour of the stability and reliability offered by long-term rental assets. This trend has been highlighted by recent data and surveys, which suggest that short-term rentals, such as those offered through platforms like Airbnb and Stayz, are seen as riskier and more labour-intensive, with many investors questioning their profitability.

A comprehensive survey conducted by the Property Investment Professionals of Australia (PIPA) has shed light on this evolving investor sentiment. The Annual Investor Sentiment Survey, which gathered insights from over 850 property investors, revealed that a staggering 92.1 per cent of respondents had no properties rented as STRA. Furthermore, only 1.7 per cent of those who purchased properties in the past year intended them for short-term rental purposes.

Cate Bakos, Chair of PIPA, explained the rationale behind this preference for long-term investments. “Investors are telling us loud and clear that they want to contribute to the long-term rental pool, not chase short-term gains,” she stated. Bakos elaborated on the factors driving this trend, noting that “STRA properties may look attractive because of their high nightly rental rates, but they generally don’t align with the fundamentals that underpin successful property investment.”

The survey also highlighted that 87 per cent of respondents had never rented out a property as an STRA over the past five years. This finding underscores the negligible role short-term rentals play in serious investment strategies, according to PIPA. Investors cited increased risk, additional work, and reduced reliability as primary reasons for avoiding STRA properties.

This shift in investor strategy comes at a time when the Brisbane City Council is planning reforms to restrict short-term rentals in low-density suburbs. Starting June next year, approximately 500 homeowners will be prohibited from renting out properties as STRA. The council’s initiative aims to free up more homes for the long-term rental market, aligning with the broader investor sentiment favouring long-term accommodation.

Bakos emphasised the challenges faced by investors in the current market environment, which include rising compliance costs, tenancy reforms, and increased land taxes. “STRA properties were generally viewed as unpredictable and unappealing to those seeking to build serious wealth, with holiday-home locations often considered speculative rather than strategic,” she noted.

The survey also provided insights into investors’ perceptions of the best cities for property investment over the next year. Melbourne emerged as the top choice, with 40.7 per cent of respondents considering it the best city to invest in, followed by Brisbane (16.5 per cent) and Perth (9.2 per cent). Key drivers for these preferences included long-term capital growth prospects (70.3 per cent), low vacancy rates (41.5 per cent), and major infrastructure spending (37.1 per cent).

Bakos pointed out that most investors remain committed to providing stable, long-term housing. She argued that with appropriate government support, investors could play a crucial role in alleviating rental pressures. “However, if governments want to encourage more rental supply, they need to support investors in the long-term residential sector rather than burden them with additional costs and restrictions,” she concluded.

As the Australian property market continues to evolve, the preference for long-term rental properties highlights a desire among investors for stability and predictability in their investment strategies. With regulatory changes on the horizon and an increasing focus on sustainable investment practices, the shift away from short-term rentals may well continue to gain momentum in the coming years.

The article was first published in Smart Property Investment, a sister publication of Property Buzz.