Podcast: Which Areas Are At Most Risk From an Airbnb Onslaught? | Ep. 215

Posted by Ed McKnight on 21/04/20
Which Areas Are At Most Risk From an Airbnb Onslaught 001
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Show Notes

What's Covered in the Show?

In this episode, we discuss the areas of New Zealand that are most at risk from an onslaught of Airbnbs converting into residential tenancies.

The data is in and suggests that McKenzie district (in south Canterbury), followed by Queenstown Lakes, then Thames-Coromandel are the most susceptible, while the main centres, Taranaki and Manawatu-Whanganui are the least at risk.

This is show is a preview of a longer property investment webinar we are holding tonight (14th April) at 7pm. To dig into the data, sign up on the Opes Partners website, or using the link above.


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 giving you a little preview about tomorrow night's webinar.

We're questioning which areas of New Zealand are going to be most at risk of an Airbnb onslaught. Now, obviously there's a lot of media going out at the moment about what happens if Airbnb's are all converted into residential tenancies and so enter the residential tenancy market, and people are quite worried about this. Now what's the theory behind it?

If we have an increase in supply of rentals on the rental market, then we're going to see massive decreases in price potentially. Now, of course, that's different for each region in New Zealand because in some regions you've got lots of Airbnbs and others, you don't have a lot of Airbnbs for the number of renters. Now this is something we're actually going to go through in a lot of detail and tomorrow actually by the time we release this, it's going to be tonight's webinar.

It's 7:00 PM so Tuesday the 14th of April at 7pm I'm going to drop a link to register in the show notes, or you can just go to Opespartners.co.nz, but we're going to give you some of the highlights, before it actually comes out so that you can determine for yourself whether you want to come along or not.

Now, one of the most interesting things that I think everybody has to remember is that although there is somewhere between 45,000 and 52 2000. Airbnbs in New Zealand, there are only about 31,000 whole home Airbnbs. And what we mean by that is that those are properties where you can rent the whole place. Now, obviously those can be converted into residential tendencies, but private rooms, which there are about 13 to 20,000 off in New Zealand, those can't necessarily be converted straight into residential tenancies. In fact, they couldn't at all because that's not how it works.

You know when you go and rent somewhere, you, you rent the whole house. Now how does that compare to all of New Zealand? Well, in all of New Zealand, there's about 1.8 million total dwellings. So those are kind of individual houses, or there's a technical definition to it, but we can just use that about 1.8 million dwellings in New Zealand. So if you're looking at those whole house, whole homes that are currently on Airbnb, about 31,000 and you say, well how much is that compared to the number of dwellings in New Zealand?

Well, it's about 1.7% so it's a very small proportion, but of course it's different for all of the different regions, which is what we're going to get into. Andrew, before we do that, what's some of the main takeouts for you from this data in terms of they're the regions that are going to be most impacted or most at risk of an onslaught from Airbnb.

Andrew Nicol: Sure. So Ed and I were discussing just before the show, just around the different areas, which are going to be in our opinion, most affected. Obviously what's come out of the data, which was exactly what we expected is that your main centres generally speaking, are going to be more protected, they're going see less of an impact. And so when I say main centres, I'm talking about Christchurch. Wellington, and Auckland.

The number of people per whole house, in those regions, Christchurch 187. Wellington is 256 and Auckland is 320 so what that means is there's a lot of people available if that were to go back onto the rental market, now not all of those people will be renters but it's just interesting stats. When you look at that, compared to Queenstown for example, which is 13.

Or you look at the McKenzie District which is 9, so those are again those are the areas, where there are fewer people, per whole house. And so it would be, it would be a fair to expect that we have more of a drastic effect.

Ed McKnight: And that is so interesting. You know, 320 people in Auckland per whole Airbnb house, if that was to be converted. So if all of the, every single Airbnb, whole house Airbnb in Auckland region was converted. Into a residential property, you've got 320 people, competing for each house. Whereas McKenzie, you've only got nine people competing for each house. And of course, some of those people already have homes that they either own or are renting themselves.

So you can just imagine and already see quite clearly the difference that it's going to potentially have between McKenzie and Auckland. Now, one thing that we can't necessarily put into the data but would have a major impact is the idea of holiday homes. So there are probably a lot of people who own holiday homes in the McKenzie district, which is kind of Twizel, and some nice areas around the Alps that are probably holiday homes that they will put on Airbnb for the times where that they're not using it, but they wouldn't necessarily convert it into a residential tenancy if the Airbnb bookings dropped off.

And so although we can look at this and same with, you know, talk about Queenstown that, there are a lot of Airbnbs there. Are they all going to convert into residential tenancies or not necessarily if there is a high proportion of holiday homes there, of course investors would do that investors who have bought an order to convert them into Airbnbs, sure they would do that straight away. But what we can't factor in is the holiday home factor. But nonetheless, we still know that Queenstown and McKenzie are probably going to be much more impacted, or at least they're much more at risk than some of those main centres, which is very interesting.

Now, the other thing that I just want to talk about in relation to this is the specific other districts which are least at risk, because what's quite interesting, and it's exactly what you'd kind of think again is the areas that tend to be get more tourism. Tourism hot spots have far more Airbnbs than some of the other regions. So although the main centres, Auckland, Wellington, Christchurch, are relatively protected. So appliances like Taranaki, the Manawatu and parts of Northern Canterbury, and even Southland. Those areas tend to get at less tourism compared to the West Coast or up around Nelson and Blenheim or even up in the Bay of Islands and Northland. Those areas tend to have more Airbnbs, and so are much more likely to be more affected than some of those other ones.

And of course, the other thing, which we can't necessarily quantify or I haven't been able to quantify yet, although I'm still going to try before we get to the webinar, is to find data about, well, who actually accesses these Airbnbs. So I would expect that Auckland, Wellington, Christchurch, a higher proportion of the people who take up and use Airbnbs there are travelling for business as opposed to leisure.

So in Queenstown for instance, because there's much less business going on there, you would expect a much higher proportion more of the people who use Airbnbs to be going there for tourism and therefore international tourists is what we're really talking about who are most likely to drop off over the next year or couple of years. Well, if a higher proportion of the people in Auckland, Wellington Christchurch, the main centres are going there for business, that may not necessarily drop off because of the Covid 19 epidemic, right? Because that could be people like myself, and Andrew actually who travel frequently between Auckland and Christchurch although we don't necessarily stay in Airbnbs ourselves, you can expect that some people would be in there, so they will still will be some pent up Airbnb demand there.

So you may not see as many Airbnbs being converted into residential tendencies, which is another point, which although I don't have the data to quantify, you can see that, hey, that probably makes sense as well. Now, Andrew, uh, is there anything else you want to share before we wrap it up?

Andrew Nicol: Yeah I just wanted to just point out another couple of things and conversations that I've had with some people who we deal with who deal with Airbnbs, so John Laurie, who was actually on our show, I spoke to him the other day, and he's still pretty positive about his business coming out of this, however there's just going to be some changes.

So some of his clients, he's actually encouraged to go and get a normal, tenancy temporarily, so maybe do a six month lease on the property, and so there might be six months of that particular property being off as books, but then it's likely to return back to an Airbnb because most people have bought those properties with the expectation of a higher yield plus one part that I just jotted down before is a lot of these properties are fully furnished. Fully furnished are another part of the rental market, which isn't potentially normal. Having a property full of furniture compared to an empty property.

So if I were looking for property to rent, I would want something to be completely empty so that I can put my own furniture in there. Whereas a lot of the Airbnbs are fully furnished, right down to the teaspoons, so I don't imagine a lot of people are going to put all of that furniture into storage. And again, if they do, it might just be a six month, 12 month window. So maybe that's something to consider. But I guess part of this is going to depend on when we open up the borders again. And I think that that might be the longer term deciding factor.

I spoke to a nurse this morning who was saying that she believed that they wouldn't open the borders until a vaccine was available. But also I read that a vaccine is becoming more likely at a faster rate. So once that occurs, when borders do open, t again, you can expect some of these Airbnb investors are going to want to see a good return on their investment again.

Ed McKnight: Fantastic. Well, let's wrap it up there. Of course. Please don't forget to rate, review and subscribe to the show. It really does help us get the message out to more people and hey if you want to come along to this webinar, which is happening tonight, 7:00 PM we've got so much more data that we are going to dig into and share with you. It's going to be a lot of fun.

Either tap or swipe over that cover art, and click on that link. It'll take you straight to where you can register or just head along to Opespartners.co.nz register there. And hey, even if you can't make it, why not sign up anyway? And then we'll send you the recording as soon as it finishes.

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.