Banning Short Term Rentals is not a Long Term Solution

Strong demand from visitors and migrants, combined with record low vacancy rates, resulting in a surge in rents, have brought into question the role of short-term letting platforms, such as Airbnb, as properties have switched from long-term accommodation to short-term letting.

Short stay accommodation, listed on platforms such as Airbnb and Stayz, have emerged in recent years impacting two key sectors of the property market.

Firstly, short term rentals gained popularity by providing non hotel accommodation options in Australia’s tourism market. Secondly, as the short stay market gained acceptance, investors had further options and potentially higher returns for their properties.

The post COVID surge in both visitation and population growth has simultaneously increased demand for both domestic tourism and housing accommodation. Tourists are invariably prepared to pay a premium for a different experience than a traditional hotel. Furthermore, a surge in international migration, combined with a more modest increase in dwelling supply, has resulted in residential vacancy rates reaching record lows.

All this has contributed to long-term rental properties experiencing strong rental growth (the fastest in over a decade according to the ABS), further compounded by property owners switching their property to the potential stronger returns from short-term letting. The limited supply of long-term rental accommodation and strong rental growth has led to regulation of short-term listings, with some local governments placing financial and/or quota penalties on short-term letting. These measures have been introduced to reduce the attractiveness of short-term letting and encourage owners to move to long-term letting with a view that an increase in the long-term rental stock will ease pressure on rents. 

To examine the role of short-term accommodation in Australia’s tourism and housing markets, the PAR Group, analysis undertaken by Damian Stone of Y Research and Rob Ellis of The Data App, reviewed the hotel, short stay accommodation and long-term rental markets in 11 major tourism hot spots (metropolitan and regional) across mainland Australia.  Markets reviewed for the study were:

  • NSW – Bondi, Manly and Coffs Harbour.
  • Victoria – St Kilda and Geelong.
  • Queensland – Fortitude Valley and Townsville.
  • West Australian – Fremantle and Busselton.
  • South Australia – Glenelg and Barossa Valley.

These suburbs were chosen due to the dual role of short-term accommodation – to offer alternative accommodation to hotels for tourists and secondly an investment option for housing owners (short term verses long term rentals). As the largest platform, all short-term rental data was from Airbnb, tourism accommodation information was taken from, and rental data was taken from Given the popularity of these markets for tourists, short term rentals were likely to be more significant than the average suburb.

Key Findings


  • Short term rentals are a major part of Australia’s accommodation market. Within the tourism hot spots reviewed, short term rentals represent 29.5% of tourist accommodation supply. This is despite nearly 8,000 hotel rooms being available in the reviewed markets.
  • Glenelg has the smallest proportion of short-term rentals, as part of their tourism accommodation market, with 13.8% of the stock. Townsville with 63.1%, has the highest proportion of short-term rental.
  • Based on advertised properties, listings for short term rentals were priced at an average of $336.5 per night across the markets reviewed. In comparison, the average hotel room rate was $194.7 per night.
  • The 73% price premium of short-term rentals to hotels represents what tourists are prepared to pay for a likely combination of greater space, more amenities or a more homely feel.
  • The increased popularity and strong financial return of short-term accommodations has seen a proportion of the rental stock, previously on the long-term rental market, switch to the short stay market.
  • However, based on the latest census (2021), Airbnb listings account for only 1.3% of total housing stock in the study area tourist hot spots. This is only slightly higher than the national share of 1.2%; based on 130,000 short term rental listings across nearly 11 million Australian dwellings. In comparison, empty dwellings account for over 10% of the housing stock.
  • In spite of the shortage of long-term rentals, there are currently only around two short term rentals for every long-term rental property within the reviewed markets. Busselton, in regional WA, has 7.8 short term rentals for each long-term rental, which is the highest proportion of short term to long-term rentals. Manly with 0.85 short term rentals per long-term rental has the lowest proportion.    
  • After taking into account occupancy rates and costs (commissions to platforms, management fees, etc), short term rentals return, an average, of $142.5 per night across the markets reviewed. In comparison, the average nightly rate for long term rentals, accounting for typical management fees, was $88.2 per night; a differential of around $54.3 per night.

The chart on the right shows the price per night for the different accommodation uses within the markets covered by the study.  

  • The 38% return above long-term rentals, even accounting for occupancy rates as low as 54% for some short-term accommodation locations, compared to the security of a year’s lease for long term rentals, helps to explain the attractiveness of short-term letting for investors.


  • The small number of short-term rentals as part of housing stock and the higher returns for investors compared to long- term rentals, even with a low occupancy rate, suggests measures to curb short-term rentals will not deliver the expected increase in long-term rental accommodation. The higher returns, even at a reduced occupancy rate, will likely result in even more housing stock becoming vacant.




Imposing limitations on short term accommodation across Australia, in light of the current dwelling shortfall, is unlikely to ease rental property shortages given the small number of short-term listings, while it will negatively impact the domestic tourism industry. 


Across 11 tourism hot spots, short-term rentals only account for 1.3% of housing stock, while at a national level they account for around 1.2% of total housing stock. Based on the latest estimates from the Master Builders Association, which predicts around 170,000 homes will be built in Australia in the 2022/23 financial year, removing all short-term listings from the market would only add around nine months’ supply to the national housing stock.


Even if all short-term letting ceased, it is unlikely to result in a composite increase in long-term letting. CoreLogic figures for July 2023, shows 32.7% of all current property listings are owned by investors. These investors who, according to Government’s data own around 30% of Australia’s nearly 11 million homes, are exiting the market for a variety of reasons, including higher interest payments, changes to rental tenancy legislation, increases to land tax in selected states and potential restrictions on short term rentals.


The rise of short-term accommodation is strongly linked to Australian domestic tourism. Prior to the COVID 19 pandemic, tourism was a $166 billion dollar industry in Australia. Over the course of the pandemic (March 2020 to June 2022), according to Tourism Research Australia, lost tourism spending was $153.6 billion. Tourism is picking up and expected to return to pre pandemic levels by 2027. Major events, such as the upcoming Women’s World Cup and Taylor Swift’s tour, have led to airlines adding additional flights to meet demand. Without short-term rentals, the hotel market is unable to accommodate demand from sports fans or Swifties.


Within the study area, short term rentals represent 29.5% of tourist accommodation supply. In regional areas this increases to 33.3%. Short term accommodation plays a key role facilitating tourism, whether this be international travellers, music festivals, food and wine showcases or sporting events.


Short term rentals, due to demand from tourists, are able to attract a significant price premium – an average of 73% over hotels. This price premium highlights the additional price visitors will pay for a likely combination of greater space, more amenities or a more homely feel. Short term rentals cater for leisure travel, such as families who want to avoid paying for multiple hotel rooms. This price premium helps to explain why a proportion of investors have moved their properties to short term over long term rentals, despite strong rental growth from long-term letting. 


The major reason for rising rents, is the imbalance between housing supply and demand. In 2022/23, 170,000 homes are expected to have been built, while Australia’s population will grow by 2%, including 390,000 international migrants, in addition to underlying local demand. This strong demand, against a backdrop of a lot softer supply and investors shifting from long-term to short-term rental, has led to the current strength in rental growth.   

While moves to regulate short-term accommodation, such as night caps or licensing, may temporarily ease the supply shortfall, it will not resolve the long-term supply/demand imbalance. A reduction in the number of days permitted for letting is likely to increase rental prices further, as properties are reserved for school holidays, Christmas and New Year and major sporting/cultural events.

Analysis shows that even on an annual occupancy just above 50%, short term rentals can deliver returns, on average, 38% higher than long-term rentals. Owners of short-term rental properties also have a greater flexibility to alter prices to meet changing market conditions, rather than an annual contract with long-term renting.

The National Housing Finance and Investment Corporation forecasts there will be a shortage of at least 100,000 homes in Australia by the end of the decade. Given production constraints emerging in the construction industry, due to builders going into administration, as well as labour and material shortages, this housing shortage could be even greater.

Banning or restricting short term rentals is unlikely to make a meaningful impact on the housing markets, but will negatively impact the recovering tourism/events sector. The long-term solution to the housing shortage and reducing the pressure on rental growth is increasing housing supply, whether that is public or private, houses or apartments.