Professionals Real Estate 
While holiday homes have been a longstanding Australian tradition, leasing any type of home or apartment to holidaymakers for short-term stays is a modern trend made possible by Airbnb.
When the platform launched, it gave any dwelling the potential to be a hotel, and gave property owners an opportunity to earn more from their investment.
However, like everything, leasing homes to travellers for shorter stays can have its drawbacks. If you’re weighing up the best option for your investment in 2025, here are some things to keep in mind:
New regulations and taxes for short-term leasing in Australia
The regulatory environment for short-term rentals has become increasingly strict as the Government seeks to address Australia’s housing shortage and strata/local councils crack down on disruptions (nobody wants to live next door to a home that hosts bachelor parties every weekend).
Some recent developments include:
- Victoria: Effective from 1 January 2025, a 7.5% levy has been imposed on short-term accommodations, encompassing platforms like Airbnb and Stayz. This measure aims to address housing affordability by encouraging property owners to transition to long-term rentals. Additionally, local councils have been granted authority to cap or ban short-term rentals in their jurisdictions.
- Western Australia: Short-term rental providers in WA are mandated to register their properties by 1 January 2025. While no caps on rental nights have been introduced, local governments are empowered to amend planning schemes, potentially affecting the operation of short-term rentals.
- Byron Bay, New South Wales: A 60-day annual cap on short-term rental accommodations was implemented in September 2024. This initiative has the goal of alleviating housing shortages and addressing homelessness concerns in the region, which is a hugely popular tourist spot.
- Capital Cities: The City of Sydney is currently reviewing the impact of short-term holiday rentals, while Brisbane has a local law that requires landlords to have a council-approved permit before they can list their home for short-term accommodation.
Before you decide to turn your investment into an Airbnb, check the rules in your area and even your building—you don’t want to find yourself facing a penalty.
Profitability of short term rentals vs long term rentals
When evaluating the financial implications of short-term versus long-term rentals, several factors come into play:
- Short-term rentals: These can yield higher income during peak tourist seasons, especially in popular tourist spots and near city centres.
However, leasing a place on Airbnb requires a lot of work and expenses in terms of admin and logistics, cleaning and marketing. Additionally, income can be unpredictable due to seasonal fluctuations.
It’s fun to do the maths on the amount of money you’d earn with full occupancy, but you have to figure out how many nights per week you are actually likely to be booked, and account for the time and money required to manage bookings, furnish the place and keep it clean.
- Long-term rentals: A standard lease offers a consistent and predictable income stream with reduced management demands.
Occupancies typically span six months to a year or more, providing stability for you and your tenants.
Understanding profitability is important. Always run your sums with a worst-case scenario model so you feel confident you will be able to cover the expenses of holding your investment property.
Other factors
2025 may be the year you decide to switch from holiday letting to having traditional tenants. Some steps to help you make this decision include the following:
- Check location-specific demand: Assess the demand for short-term versus long-term rentals in your property’s location. Urban areas may have consistent long-term rental demand, while tourist hotspots might offer lucrative short-term opportunities, albeit with extended quiet periods.
- Do holistic financial planning: Account for levies, taxes and operational costs associated with an Airbnb or Stayz property (think about things like furniture repair, wifi costs, insurance and the expense of constantly replacing broken glasses, soiled sheets, etc). Ensure that projected income takes these ongoing liabilities into account.
- Review the competition: Compare your place to similar properties in the neighbourhoo. It needs to stand out if you want it to be occupied more than it is empty.
- Look at local rental availability: If there is a surplus of short-term stay properties in your area but a lack of rental properties, you may be better off bucking the trend and choosing a long-term strategy.
Switch to long term rentals in 2025
Ready for the consistency of a regular, reliable tenant and the steady income this provides? It makes sense to work with an equally reliable property manager who will work proactively to maximise the value and returns of your investment so you are happy with your decision.
To find out more, reach out to your local Professionals office today.
