Investors are preferring the Airbnb option because of its more flexible rental arrangements and higher returns. There is a lot of criticism about investors choosing Airbnb. Property investors are being blamed for the lack of permanent housing and that is an extremely unfair take on reality. There are larger pictures that are being obscured.
Big picture number one
Housing should be primarily for people to live in permanently. This is the lament of many rental spokespeople and they are categorically right. However, the property has become an investment for many because there are no other ‘safe’ investment alternatives.
Many people do not understand or trust the share market because it has so many moving parts. Investors need to rely on ‘experts’ and a crystal ball for information and projections on the companies they are investing in. The external economic environment is much more complex and dynamic and trading is also more daunting for many.
Once upon a time there were government bonds and term deposits that were safe, simple, reliable and offer good yields. Those days are gone and many fixed-income investors simply cannot live off those returns. Banks are not treated like landlords and legislated to change, nor are they given a raft of changes to improve yields. Even now when banks are passing on mortgage hikes, they are not forced to increase investment yields.
The role of banks in the housing conundrum is completely silent and why banks are not required to shoulder the burden that is placed solely on landlords. Banks lend money for HOUSING – and they are free to up rates immediately, charge late fees and be praised for profits. Landlords however are forbidden to pass on the rate rises, can not charge late fees and are admonished as greedy.
Many investors would prefer more investment opportunities and whilst real estate is a simple instrument it still requires considerable effort. Real estate is chosen because it is simple, reliable and efficient but investors always look for as passive an income as possible. Clearly, as the rental investment market becomes more difficult investors are choosing Airbnb. The platform offers many property investors an escape from rental scrutiny and a higher return on investment.
Big picture number two
The rental rules and obligations have pushed investors away from long-term property management. Investors are required to comply with state standards – rightly – that banks are not obligated to comply with. Introducing rental caps and outlawing rental bidding will be introduced to thwart landlords but there is no complement legislation for interest rate hikes and a lack of housing. More restriction means fewer investors and more pressure on tenants – the alternative is Airbnb for many.
If a tenant does not pay rent the bank is not obligated to wait as landlords are. If there are interest increases to the investment loan landlords cannot pass on those increases and certainly not to the level of the bank increases. There is no discussion that banks be involved in rental improvement so the burden is only on the investor. All investment has a chain effect it’s not just one actor.
The reason investors are choosing Airbnb is that it is short-term, high yield and there are fewer unfairly distributed rules. The government is responsible for housing shortages but instead of doing its job, it places more and more restrictions on those that are already contributing.
Working life is not indefinite – it comes to an end. Therefore, people need to invest and live off investments. Until there are investments that are as simple and as secure as real estate we will always be chasing our tails on how to please tenants and landlords.
As you can see investors look for the simplest, highest-yielding investment. Tenants are also investors and they follow the same script.