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Tags: Real Estate, Investment, RentProperty | 06.10.16

How is Airbnb affecting Australia’s Property Landscape?

The sharing economy and Airbnb

The world is currently experiencing a global digital revolution.

As a result we’re witnessing the creation of the ‘sharing economy’; a socio-economic ecosystem built around the sharing of physical and intellectual resources.

Airbnb, a Californian-based accommodation platform, has built on this concept and empowered ordinary individuals by stripping away the reliance on traditional accommodation gatekeepers through the management of payments, marketing, and communication on a single platform.

An opportunity for property owners?

According to Airdna (an Airbnb rental data and analytics provider), there are over 70,000 Australian houses and apartments listed on the site, up from 40,000 12 months earlier.

Here is a breakdown from the top four Australian capitals (courtesy of Airdna).

SYDNEY: 21,851 active Airbnb rentals

Sydney

MELBOURNE: 13,359 active Airbnb rentals

Melbourne

BRISBANE: 4,302 active Airbnb rentals

Brisbane

PERTH: 4,486 active Airbnb rentals

perth

One main reason for the staggering increase in listings has been recognition of the income opportunities on offer. Airbnb provides an innovative way for property owners (and even investors) to use short-term rentals to generate a passive income.

The average price of a Sydney listing is $160 a night, while in Melbourne guests pay an average $118. According to the Sydney Morning Herald, Airbnb hosts in Australia earn an average of $7,100 annually. Australia is quickly becoming one of Airbnb's fastest growing markets, with Sydney in the top ten cities with the largest number of listings.

This additional income provides a strong incentive for people to list their properties on the platform as a means to pay off their mortgage quicker, renovate or simply improve their lifestyle.

Airbnb benefiting from tourism growth

Another influence on the dramatic increase in supply has been Australia’s tourism sector.

The weaker Australian dollar makes an overseas holiday less attractive for locals (70% of tourism is from Australians visiting their own country) and the weaker dollar also makes visiting Australia cheaper for international visitors.

Recent data from Tourism Australia indicates that 7.94 million visitors arrived in Australia in the 12 months to July 2016, an increase of 10.6% compared to the previous year. That equates to an extra 763,000 visitors who need accommodation!

With Airbnb increasing in popularity across the globe, more travellers to Australia are already familiar with the platform, which is helping to generate demand for short-term accommodation listings across the country.

Some people just don’t like to be ‘disrupted’

The sudden growth in the platform’s popularity has shone a light on some problems regarding short-term rentals in Australia.

Traditional accommodation providers like hotels are worried. According to Tourism Accommodation Australia, “for every 100 rooms listed on Airbnb in Melbourne, 55 hotel industry jobs were lost.”

Similar sentiments are shared by strata bodies and local councils across the country.

Unclear legislation complicating the sharing economy

“At a state level, we need some kind of statement clarifying that renting out your principal place of residence [as a short-term rental] is a permissible use.” - Mike Orgill, Airbnb’s Asia-Pacific director of public policy

According to Legal Vision, a leading commercial law firm, the legal treatment of Airbnb varies from state to state depending on where the property is situated. To complicate matters further, there is also a lack of understanding between different local government areas within states.

Two recent incidents in Melbourne and Sydney highlight this division:

Melbourne

In late July this year, a petition against Airbnb formed by residents of the Watergate Docklands apartment buildings in Melbourne fell apart when it was ruled out by the Victorian Supreme Court. The courts found that enacting the Owners Corporation Act 2006 regarding businesses that partook in short-term rentals went beyond the scope of what was intended by the parliament.

Sydney

According to the Sydney Morning Herald, a resident of NSW was notified by the Randwick local council that her Airbnb was being run as an “unauthorised” bed and breakfast. The council letter stated that ‘she could be liable for a maximum penalty of $1.1 million plus an additional $110,000 a day.'

While the stance by all levels of Australian government lacks uniformity, the Australian Tax Office (ATO) has already recognised the emergence of the sharing economy and is taking a more progressive approach.

Airbnb and the Australian Taxation Office

Hosts on Airbnb must declare their rental income to the ATO and if the annual amount earned is greater than $75,000 per year the host must register for GST. There are several excellent sources of information dedicated to this:

Using these guidelines there are three scenarios where you may be eligible to claim a tax deduction:

  1. Hosts who rent their entire premises on an occasional basis (e.g. when they’re away or on holiday) to make income on the side.
  2. Overseas investors who rent out their entire property locally through Airbnb.

Those who rent out a spare room through Airbnb in a home they reside in. In this instance they may only be eligible if they can provide evidence that they attempted to rent out the room at a commercial rate.

Airbnb recently joined forces with global tax services provider H & R Block in an agreement to ensure that sufficient tax guidance and tips are provided to hosts on the platform.

The future of sharing

Australia is becoming increasingly popular as a travel destination with many holiday seekers requiring short-term affordable accommodation which is helping to drive up demand. On the supply side, the financial opportunities Airbnb provides has seen listings double over the last 12 months.

In the absence of clear legislation around the country, Airbnb continues to disrupt the accommodation sector. As the ‘sharing economy’ continues to grow and become mainstream, government, local councils and strata organisations will be under increasing pressure to adopt a more progressive approach.

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