GUEST OBSERVATION

The previously unregulated short-term letting industry in NSW has just seen some big changes and investors are being warned to watch out. Regulations to Airbnb were going to happen eventually, but on Tuesday the wheels were finally set in motion.



The game changer that has occurred and why Airbnb now only makes sense for home owners and not investors.



Airbnb are going back to their grass roots in NSW.



Originally the platform was set up for people who wanted to rent out some spare rooms in their own home as an alternative to backpacker accommodation for travellers, thus allowing home owners to make some spare cash.



The Airbnb platform has since been exploited and has become the short-term accommodation platform for investors to maximise profits.



Without proper regulation and no barriers to entry this has resulted in many complaints from local communities and a need for government and other regulators to step in.



Regulators have stepped in and the regulations are being deemed as "the toughest laws in the world to crack down on bad behaviour” by Better Regulation Minister Matt Kean for good reason.



Many investors are left screaming “what about our returns” but I've been cautioning Airbnb investors for many years on investing in a new to market concept that has always been very unregulated.



If you're going to invest hundreds of thousands into an industry in its infancy, you need to have an appetite for risk and be prepared that it may not last long.



Investors should have assessed their numbers based on long term rentals as well and ensured they were still able to afford their investment, without a supplementary Airbnb income.



We saw so many people jump on the band wagon without really understanding the risks associated with it.



This might only be rolling out for Sydney at the moment, but it is setting a benchmark for other locations to follow. Councils like Byron Bay have been threatening tighter regulation in this sector for a while now and are also heading down this path.



The regulations follow other countries like Japan where in recent weeks only 13,800 properties were left on the platform after an estimated 68,000 properties removed almost overnight when regulatory changes came into play.



The market has seen an oversupply of property in many locations resulting in downward pressure on pricing and Airbnb hosts having to take lower fees to avoid vacancy and bigger group bookings to make up the numbers.



Don’t think that this is exclusive to Airbnb, this will impact all short-term accommodation platforms ‘like Airbnb’ but the likes of stays and bookings.comwill also come under the same scrutiny.



The property market, in Airbnb hotspots will see more properties being taken from the short-term rental market and moved over to long term leases and even some investors pulling the pin altogether as a follow-on effect from the regulation.



Some investors will not want to conform with the legislation and will have to put their property on the market, as many of the properties are set up as rentals only and not in an area that the owner of the property resides.



Some property owners simply can’t adapt and will have only two options, a long-term lease with significantly lower returns, or to sell.



The policy is set to be reviewed in 12 months’ time.



This regulation really only starts to scratch the surface of some of the issues in the short term letting sector. Many property owners are renting out rooms or whole homes without consideration given to the safety of the occupants.



We see many properties that are not compliance with fire regulations, pool safety, building codes, railing heights on balcony’s, and many other safety hazards that put occupants, including families with children at risk. If you rent our a property on a long term lease, or you are a commercial hotel venture you need to be compliant. But this sector of the DIY hotel space has continued to circumvent their obligations to other peoples safety.



It wont be long before this too comes into the spotlight, and so it should.

Anna Porter is a property commentator and valuer at Suburbanite.