Hundreds of landlords are moving from long to short-term lets on Airbnb and other online outlets to counter falling yields, according to DJ Alexander Ltd.
This comes as property owners abide by the more stringent regulatory changes in the buy-to-let (BTL) market, but the property management firm warns against moving too quickly into a ‘volatile’ marketplace.
In a recent report conducted by the Residential Landlords Association (RLA), 7% of landlords were moving from long-term to short-term lets due to increased financial costs in the BTL market.
Meanwhile, Airbnb reported that they have 168,000 listings across the UK, earning £657 million in the last year for the hosts and contributing £3.46 billion to the wider economy. It also claimed that 76% of its hosts rent out their primary home, indicating that 24% are using their secondary property. The growth of Airbnb has led to a 60% annual increase in London listings alone.
David Alexander, managing director of DJ Alexander Ltd, said that recent regulatory and financial changes are causing many landlords to see Airbnb as a viable alternative to long-term letting.
“The pluses in short-term letting are that the daily income is higher than long-term letting; there are less legislative, financial and regulatory issues; and it can be less punitive, in some circumstances, for borrowing,” he explained.
“However, keep in mind your lender must be told if you are making this change; your insurers need to be informed; there may be considerable dead periods when you aren’t earning; the maintenance costs will be higher; and Airbnb is coming under considerable pressure from numerous local authorities around the UK and abroad. They have already been banned in some cities (Palma in Majorca), had their activities restricted in New York and Barcelona, and are under review in Edinburgh.”
Alexander added that there is more work involved in dealing with 50 guests a year than in two permanent clients staying for a year and that it will all depend on one’s expectations, current experience of where their property income is going, and the person’s location.
While Airbnb listings are widespread, there are four key areas where the majority are located: London, Scotland, the South West and the South East – which collectively account for 75% (125,100) of all listings. These areas also account for 84% (£552 million) of all income generated for hosts across the UK.
Alexander said these figures highlight the importance in short-term letting of having a rental property in the right area. Interestingly, Scotland has the highest average annual ratings of anywhere in the UK at £3,600 per year.
“The issue for any wavering landlord contemplating the move from long to short-term letting is the level of return, the guarantee of occupancy, the limiting of regulatory and financial restrictions, and the impact on the long-term value of the property investment,” he said.
Finally, Alexander urged landlords thinking of this step to think hard before ‘making a leap into the unknown’.
“It will work for some but could be a mistake for others,” he concluded.