The PROPERTY DOCTORS, Sydney Australia Novak Properties

EP. 1412 RADICAL AIR-BNB SHAKE-UP COMING SOON

• Mark Novak, Billy Drury, Greg Williamson • Season 30 • Episode 1412

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The short-term rental landscape is about to undergo a seismic shift that will fundamentally change the economics of platforms like Airbnb across New South Wales. Landlords and investors who have built strategies around maximizing returns through holiday letting now face a game-changing regulatory overhaul.

At the core of these changes is a dramatic reduction in allowable rental days for non-host properties—slashing from 180 to just 90 days annually. This instant halving of potential income days comes alongside even stricter limitations in coastal hotspots, where some councils are pushing for just 60 days of short-term rentals yearly. The timing couldn't be more significant for property investors, with implementation potentially beginning as early as the next financial year.

The financial implications are substantial. Currently, many property owners enjoy significantly higher yields through short-term rentals, with some needing only three nights of Airbnb bookings weekly to match the income from traditional tenancies. However, this advantage is rapidly diminishing under the weight of compliance costs and day restrictions. Non-compliance carries severe penalties—$22,000 for individual owners and a staggering $110,000 for corporate structures. With platforms required to report usage data directly to the government, exceeding limits isn't just costly—it's virtually impossible to hide.

Beyond the financial considerations lie practical concerns about property management. Strict fire safety requirements including evacuation plans, specialized smoke detectors, upgraded fire doors, and extinguishers add substantial compliance costs. For strata properties, additional complexities arise as existing bylaws may need updating to align with new legislation. As these changes unfold, we're witnessing a market correction where the gap between short and long-term rental yields narrows significantly, potentially increasing housing availability in markets previously dominated by holiday accommodations. Whether you're an investor recalculating your strategy or a traveler expecting higher accommodation costs, these changes will reshape Australia's rental landscape for years to come. Have you considered how these new regulations might affect your investment plans or holiday budgeting?

Speaker 1:

it's crunch time for airbnb. We're going to talk about new legislation coming in for airbnb. Stay tuned. I'm the ringleader, so let's go. Expert Greg Williamson. Real estate agent guru Billy Drury. Greg, thank you so much for coming on today to talk about Airbnb.

Speaker 2:

What do you know? I know that there's going to be a huge shake-up, which will go, but let's just make one crystal clear thing we all refer to it as Airbnb, and that includes all the other platforms, stays and whatever. Technically, they're all falling under what they classify as short-term rental agreements, in other words STRAsas. So I'm not going to talk jargon. I'm happy to keep calling it airbnb, as long as we understand that it's more than airbnb yeah, str short-term rental accommodation agreements can we?

Speaker 1:

take a helicopter view for a second, just just because sometimes we're in the bosom, the bosom of it, and we don't and and I and I miss, miss the overview. Why would someone do short-term rental accommodation for their property and what's the problem that's happening here that they're trying to fix?

Speaker 2:

short reason. Uh, as billy will attest, uh, the landlord just gets a better rental return, a lot better yield on their investment yeah, I'll give you an example?

Speaker 3:

can I, can? I just I've got in sure as an example, like a, we've just sold an apartment in DY and the owners were renting it out. They only needed to rent it for three nights a week to cut, to get the same return as what they'd get for a whole week with a long-term rental. So they were saying well, we'll rent it for three nights a week, our family and our you know extended family can enjoy the property for the other half of the week, and so it serves a bit of a multipurpose. But if they choose to rent it out for the entire week, there's double the return, particularly in the peak seasons.

Speaker 1:

Now there's a problem with that.

Speaker 2:

Yes, a couple of reasons. Yes, a couple of reasons. If you've just got a normal residential property and we're not talking just Strata, we're just talking your normal home, Torrance, title, whatever to qualify to be an actual STRA, you're through a portal those platform portals then register you with New South Wales government, you come under a lot more stricter rules and regulations. Your fire regulations are totally different and I'll give you a couple of examples. If you've just got a normal strata unit and you've just got a normal an owner's corporation with a fire smoke alarm system in it, that's not good enough. If you're an STRA, you have to have evacuation plans. Your smoke detector can't be just a normal smoke detector. It's got to either be hardwired back to the mains or it's got to have one of the new non-removable batteries that's got a life expectancy of 10 years. You have to have all your fire doors upgraded so you might be in a building that doesn't already have fire doors in the building. You're going to have to have fire extinguishers in the apartment. This is just before you even get it registered.

Speaker 2:

So there's a lot more requirements for a short-term rental property. So you've got to look at those things. You've got a lot of upfront further expenses, which is one of the reasons it comes under. So short-term rentals don't come under the tenancy act. They're totally different, you know. So you can't use, as Billy will tell you, you can't get someone to sign a normal tenancy agreement if they're short-term rental. Short-term rental 90 days or less, or 30 days, you know, in period, so anything along those lines. They're short-term rentals, which is normally holiday periods. You know someone's there for three weeks, two weeks, two days. You know it all depends.

Speaker 1:

But they are classified as short-term rental. Now, Greg, I'm a bit peeved with all this compliance. We're getting crowded with compliance and I feel like if it ain't broke, don't fix it. But I feel like we fix and we fix, and we fix and we fix, and it's just you know what? We could be driving on these roads at 10 kilometres an hour and it would not be an accident, and it feels like it's just getting harder and harder and harder. There's got to be collateral damage. You can't just make a 10 kilometres. You know. Speed limit on highways as an example. I'm being limit on highways as an example. I'm being silly, but as an example. So tell me, what are they doing now for more compliance with airbnb? What's the change?

Speaker 2:

all right, okay, so the compliance to become a short-term rental, that's not changing, right. However, what is going to change is and remembering it breaks down into two categories host and non-host. A host is if you actually live in the premises yourself and you may be then short-term renting out a room or two rooms. If it's a three-bedroom, you might move into one bedroom and over the holiday period Christmas you bring in short-term rental in those bedrooms. So that's a host. So those rules aren't changing. So now we're going to flip to the landlord slash investor, which would be the non host rules and regulations, right? So currently, if you've got your investment property set up for rental, you're a non host.

Speaker 2:

Stra that's currently legislated to you can only use it as 180 days in the 365-day period. Now you can't dodge around that because when you put your ad up through your portal, it is the portals responsibility. Which they do is reports that how many days that you have used to the New South Wales government. So the government Department of Fair Trading knows exactly how many days you've got and have used. What's changing and this is the big kicker is it's going to go from a maximum of 180 days to 90 days Instantaneously. Using Billy's person, they're going to lose half of their rental days instantly. Now the other change that's coming in is the Department of Fair Trading is also giving local council authorities the argument's sake that people want to go and spend Christmas, summer, whatever it may be, they're limited to a total of 60 days.

Speaker 2:

Now that's going to put a lot more pressure on you as real estate agents because you're going to have to find more tenants and then make sure that they are out during that peak period and that's probably a tenant's worst nightmare. You know, I want to rent for something for 12 months and you're not going to allow it because your landlord says no, no, I need that short-term rental to boost up my income and therefore do you have lags in rental, you know? So on and so forth. So there's a few problems there.

Speaker 2:

The other main issue is that the current fines for non-compliance so, remembering the government's overviewing, they're seeing how many days you've done the current fine for an STRA breach if it's in an individual name. So Mr and Mrs Smith owns the property, it's $22,000. As we know, a lot of rental properties are actually owned in a corporation's name. It could be Mr and Mrs Smith Proprietary Limited owns the actual rental property. That fine if you breach is currently $110,000. Wow, yeah, sort of takes a lot of your profit out. We don't know what the fines are going to increase to yet, but they are going to be substantially increased Now these go to the average day.

Speaker 3:

You know average mum and dad who are just unaware blissfully unaware.

Speaker 2:

Oh, blissfully unaware. Yeah, and you know they think well, this is my investment property, I can do what I want with it, Absolutely as long as you comply with the laws.

Speaker 3:

This is just straight into the. You know the serious bonds.

Speaker 2:

And if you don't, if you just decide to forget the Airbnb slash short-term rental approval process and you want to go out there by yourself and do it, people will complain. So we normally and I'll talk about Strata because that's my field of expertise Someone will ring up and go there's new padlocks out the front of the unit or whatever. The owners' corporation is getting complaints. There's a load of people coming in and out all the time. Obviously it's Airbnb. It goes through the process. There's no bylaws in place, or there is a bylaw in place preventing it. You get pulled into ncat. Uh, you, you're going to get a fine there. You're also going to get breach notices. You're then going to be reported to the department of fair trading. The department of fair trading is going to come down on you like a ton of bricks.

Speaker 3:

You're going to be hit with these fines, and this is scary stuff like this is terrifying to the average you know, the average landlord who's just trying to get a little bit of extra cash flow in whilst they're on holiday or whilst they're you know you're not using the property for Christmas. This is scary.

Speaker 3:

And it takes a lot of work to get into a position of compliance in the first place. So the net effects the reason I'm a past Airbnb host and not a current one is because the long term rental yields they're catching up. They've closed the gap between long and short term simply because people are not actually going to bother. You know, even looking at the short term option anymore. But you're also going to find as the consumer prices will go up on Airbnb purely to just keep in line with costs.

Speaker 2:

Oh, absolutely. On Airbnb, purely to just keep in line with costs? Oh, absolutely. And you know, again, using the strata situation, you might not be Airbnb. Somebody else in the apartment block is, that's not a problem. You've already got existing bylaws in place, but now the law has changed. Your bylaw is no longer working in conjunction with the new laws, so you're going to have to now go and get your bylaws changed. You're going to have to hold a general meeting. You're going to have to do all that. So there's all these flow-on effects and look mark's absolutely correct. Um, while the new south wales government is desperately trying to be big brother over a lot of uh areas, um, end user ends up paying and use this definitely Don't forget that.

Speaker 3:

Yeah, more laws. And final question, greg Some of the councils, some of the areas you're seeing across Sydney and New South Wales, have seen changes come in. Yes, Do you reckon the rest of this is going to be rolled out If someone's you know Airbnb or whatever they're looking at.

Speaker 2:

Yeah, look, there's a whole raft of new legislation that they're talking by the end of June. Okay, whether or not this is going to be tacked onto that, and you know I'm being cynical whether or not the New South Wales government wants to start increasing their fines in the new financial year, I don't know how that affects their bookkeeping, but once they flag these things, it doesn't take them long to start making these changes. Look, we're not sure where the pressure's coming from. You know, is it council? Uh, that's saying we want more, uh, control, for the simple fact that airbnb to a council is an issue. There's a lot more waste, there's a lot more noise complaints. You know and we're looking at some of the areas, uh, that they really want it dramatically reduced is where most investors have along the coastlines, you know, um, you know where there's a high turnover, um, you know. So, your bondos, your manly's, uh, your coojies, you know, anywhere along where there's a beautiful area, uh, that people can, you know, enjoy themselves, that local council is going to look at it. And where are?

Speaker 3:

you finding information? Where's the best place to stay at current on this?

Speaker 2:

Look it's. You can go onto the New South Wales website. We get information before it's actually published, so we're pretty up to date. But look, if someone's got an issue, they can always email us. That's part of what we do. We act as consultants for individuals, even though we're in the strata field. There's no difference between a strata short-term rental information to you know mum and dad that owns a house sitting on you know the manly force or the DY or whatever. It's the same rules and regulations you know. Of course they don't have to worry about bylaws, but the information is the same.

Speaker 3:

But yeah, brilliant. Well, there you go. There's jacob coming soon could be as soon as the new financial year and this is going to, you know, impact investors hard, but it's also going to impact consumers, you know, don't take it that, um, you know what it what it costs to run an airbnb, and it's a lot of work.

Speaker 3:

It's a lot of work and I think that's why a lot of people are now shifting towards putting a long-term tenant in place, because the hassle is so much less. The yields are getting closer and closer. A lot of clients are reaching out for rental appraisals just to get an update.

Speaker 2:

Look, you'd know better than I, billy. I mean, you've got a short-term rental in there for you know, even if it's there for four weeks, then you're going to have to put in a long-term rental. Then how long does it take to go and find a new tenant? You might be three weeks before you put another one in. That downturn affects your yield, you know, and that's something landlords really have to start considering.

Speaker 3:

Thank you, greg, pleasure as always.

Speaker 2:

Okay, Thanks guys.