Podcast: Update: Have AirBnbs Flooded the Market? Spoiler: Bookings Are Looking Pretty Good | Ep. 255

Posted by Ed McKnight on 25/05/20
Update Have Air Bnbs Flooded the Market 001
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Show Notes

What's Covered in the Show?

In this episode, we give you an update on how Airbnbs are faring under the current market conditions.

Since the last update, we gave 6 months ago, 10,000 Airbnbs have come off the market (20% of the stock). However, bookings have increased ... and are at the level where the number of bookings per Airbnb per week are on par with earlier in February.

We also mention our property investor quiz. After just 7 questions, you'll get a 'yes', 'no', or 'maybe' answer about whether you're in the position to invest in your first rental property.


Transcript of the Podcast

Ed McKnight: Hello and welcome along to the Property Academy podcast. I'm your host Ed McKnight, and I'm Andrew Nicol, and today on the show, we're talking about Airbnbs.

We're going to give you an update with the latest data over the last six weeks of what's actually been happening in the New Zealand Airbnb market.

Now, long time listeners to the show will remember that we did a whole webinar on this breaking down the data about six weeks ago, but that was just at the very start of the level four lockdown where a lot of it was still speculative.

Now we have some of the latest data about how are people booking Airbnbs and are they booking Airbnb's six weeks on as we're coming back into level two. And hey, one of the big things to take away is that when we got to about six weeks ago and just we're going into level four lockdown, there were 51,000 Airbnbs in the country.

That was only down about four K from what it was two months before that where it was about 55,000 Airbnbs in the country. Now that's decreased relatively significantly over the last six weeks, and we've now got 41,000 active Airbnbs in the country, so that's a drop of 10,000 which is about 20%.

Now, what I'm going to go away and calculate, because I think this will be really interesting to find out, is where were those Airbnbs where, which, which regions and which districts saw the most Airbnbs come off the market because that is going to be most interesting to track, first of all, which areas are going to be most hit in terms of more supply coming onto the market.

But also to see where some of the predictions that we had about the areas that were going to be most impacted, which were most accurate because I could anticipate that areas that have strong underlying rental demand like central Auckland, Airbnbs could easily convert into a long-term rental property and then convert back later.

That's different from the likes of McKenzie district, which actually has the highest proportion of Airbnbs per person in the country where there's probably less underlying rental demand because much smaller population only I think less than 10,000 people live in the McKenzie district, so it would be a bit harder for Airbnbs to convert over.

So we'll come back with some data, but what we do know is 10,000 Airbnbs have come off the market, are no longer active. What is interesting is that we are seeing a recovery in Airbnb bookings.

So in the first week of lockdown, there were only 4,000 Airbnb bookings, and the first week, now that's down from about 25,000 in early February per week.

So massive drop of 21,000 now that's actually starting to recover. Last week there were 14,000 Airbnb bookings. So that means they were seeing, you know, an extra 10,000 bookings compared to the first week of lockdown.

And we'll see if that continues to recover or whether that was just an initial spike of people booking because we had some pent up demand throughout the lockdown and people were just waiting to book.

So we'll continue to track that. But what I do know. Is that we are having an increase in bookings compared to what it was about four weeks ago. And we've seen fewer properties on the market. So the real question as an Airbnb owner or Airbnb owners out there are probably wondering is, well, how many bookings is that per week, per property, right?

Because even if we have fewer bookings, there are fewer properties on the market. So assuming we would see each of them doing a little bit better than what the numbers would actually say. So, when we were looking at the week before lockdown, there were 19,000 bookings that week for Airbnb, and there were 51,000 Airbnbs on the market.

So that was 0.37 bookings per Airbnb, this week. It was over 0.34 bookings per Airbnb. So it was only a very small difference between pre lockdown and post lockdown activity in the Airbnb market per property. So perhaps we won't see as many Airbnb's continued to come off the market because they're getting a similar level of bookings.

Andrew, what's standing out to you within this data?

Andrew Nicol: Actually I think just the biggest thing that was surprising to me Ed, is just the rate that we are recovering. I am very surprised that in a level two lockdown environment where we can travel, but there's a lot more limited, you know, Air New Zealand are only running 10% of their flights.

People are still booking Airbnbs and actually I rang up Jon Lawry, who has been a guest on this show just to get his feedback. So he runs a high end Airbnb service in Auckland, and he said that they are seeing quite a good level of inquiry, what they're doing at the moment as they're basically trying to achieve the right at what a normal long-term rental would be plus about 10 to 5%.

So they are getting that on quite a regular basis and they're getting quite long bookings. So, anywhere between two weeks and three months he said it was pretty standard at the moment, so that's really interesting.

He does work in quite a particular market. He is working that really high end level of the market, maybe some of the cheaper properties in the market, maybe in other parts of the country, they might be getting even more demand, and certainly in places like Queenstown, I do think there will have already been a lot of properties dumped onto the market that have become normal rentals. And that's why we've seen as we spoke about in the previous show, a drop of about 30% in rents in Queenstown.

Ed McKnight: And the other thing that I just want to mention is just to add to what Andrew is speaking about, the, I know Jon from Urban Butler is at the high end of the market. So we would expect to decrease in demand and some softening of prices there just because it is a more concentrated market.

There are a fewer people operating there in terms of actually demanding those properties. I am looking for a property for an apartment in central Auckland, just a temporary one and comparing rents within there.

So I was looking at Airbnb and comparing it to long-term rentals at about that kind of $500 a week mark for apartments.

And I can tell you that it is very similar between Airbnbs and long-term rentals at the moment. They are relatively at parity, but when I look out to the long-term of the actual data, and just so you know this is going to be in US dollars, just because this is what the numbers are reported in.

When I look out to late July, early August, the daily rate, the average daily rate of what Airbnbs are actually being charged out for his very similar to 12 months ago. So 85 US dollars is for, I think July about the 27th of July, the week standing, 27th of July, you're looking at an average daily rate in New Zealand of 85 US dollars.

Last year it was $86 a week after their 89 US dollars this year, 92 last year. So very close in terms of when we look out for the next couple of months, we're starting to see prices come back to parity, but where, they were rather last year. And so I'm a bit surprised that we haven't seen steeper declines in terms of the prices their properties are being letted out for or advertised for.

What we are seeing is about 10 points down in terms of occupancy. So at the moment we are seeing decreases in bookings further out.

Andrew Nicol: Just one thing I also wanted to add is one thing that I expect to happen in the next wee while is there'll be an increased amount of regulation around Airbnb properties.

So at the moment you can pretty much get away with putting anything on Airbnb, but actually that's not what Airbnb was set up for. It was originally set up so that you could let out a spare room in your house or a studio or something like that. And now people like in Queenstown are renting out whole houses as Airbnb, and it's taking properties off the market.

Now, whilst that has been in different areas like Wellington and Queenstown, whilst that's being addressed by the local councils there, you can expect that hotels are going to go through some very challenging times ahead, and there will be a lot of lobbying for councils to support those hotels by stopping just a normal residential property unless it's mixed use zoning, and you've got the right to be able to let it out to as a business, which Airbnb falls into the category of, I expect that there will be a lot of people warned by the councils not to rent out a property as Airbnb. And so that might mean that some of those properties that have gone off the market never returned.

And maybe some of the properties that are Airbnb at the moment that people are getting away with just doing it and flying under the radar, that that will come to an end. And, also one of the other comments with the conversation with Jon is that it won't get back to normal he expects until they open up the borders.

And who knows when that will be at the stage, but obviously in Auckland, we've got the America's Cup, which starts the first race is in the 15th of December this year, and it goes through the 21st of March next year.

And I know there are a lot of people who have bought properties in central Auckland to Airbnb over that time, because it will be nuts, and that's assuming that it all goes ahead the borders open internationally so that you can have not just a trans-Tasman, you have people coming from overseas to watch those races.

Ed McKnight: I just want to mention as well, just while we're talking about regulation, is that there is a big difference between the regulation for Airbnbs and for standard residential properties.

Obviously we've had the healthy homes act come in and we've had ring fencing laws come out, but I just want to focus on healthy homes, for instance, with the, our regulations about ventilation, there are regulations about the ability to heat it, having heat pumps, you don't have the same regulation, you basically, have no regulation for Airbnb.

So it would be interesting if the government wanted to make sure that people weren't taking properties that, from the rental market and putting them onto Airbnb because of regulation, they could start to regulate Airbnbs and what would be allowed on there as well, so it'll be interesting to see.

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And hey, if you've been thinking for a while, I'm thinking about this property investment thing and want to see whether you've got the ability to become a first time property investor, the why not to hear our property investor quiz. In just seven questions it's going to give you a yes, no, or maybe answer about whether you're in the position to be able to purchase your first investment property. I'm going to link that into the show notes, so just tap or swipe over that cover art, it'll take you right there.

Thanks for listening to the Property Academy podcast. I'm your host Ed McKnight, and I'm Andrew Nicol, and we're going to be back again tomorrow with even more daily strategies, tactics, and insights to help you get the most out of the New Zealand property market.

Until next time.