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Exclusive:Airbnb bookings have dropped by half in popular Australian cities. It is threatening financial ruin to overleveraged investors, who made a decent living off the platform.
On the other hand, Airbnb super-landlords and mum and father investors are now exposed and could face severe cuts in their rental income.
Nine.com.au data shows Australian landlords were hard hit by a drop of revenues and bookings of more than 70% in Sydney and Melbourne during April. This is after international and domestic tourism has ended.
Gold Coast and Brisbane were also severely affected.
Andrew Wilson, My Housing Market chief economic economist, said this was a serious problem.
Dr Wilson explained how many Australians have “taken advantage of higher rentals and became enterprise landlords for Airbnb” in an area that has become very profitable in recent decades.
He stated, “It’s about how these Airbnb landlords survive it.”
According to AirDNA (a website that tracks Airbnb’s economy), there has been an alarming drop in weekly Airbnb revenues in all Australian cities. Between March 1 and April 31, Melbourne saw a 75% drop, Sydney 71%, Gold Coast 57% and Brisbane 54%.
The same trend was observed in weekly Airbnb bookings over the same period. Bookings for Melbourne dropped by 72%, Sydney fell by 70%, Brisbane 67% and Brisbane 67% respectively, Gold Coast 51%, Brisbane 51%, and Brisbane by 51%, respectively.
Chris Pettit, a professor of urban science at UNSW’s City Futures Research Centre, said the sudden Airbnb downturn would likely impact Australia’s broader property investment market.
Prof Pettit stated that the 200,000 listings for Airbnb in Australia were equivalent to 4 percent of the total national market.
UNSW research showed that around 80% were investment properties and not traditional holiday rentals.
“That’s about six to eight percent of Australia’s total investment market. This is a fair exposure.
Professor Pettit predicted that investors of upper- and mid-class status with liquidity would do well and weather the storm.
He stated, “But those who have leveraged substantial might face some difficulties and struggle.”
Airbnb, another site that tracks Airbnb listings, reports that five Sydney landlords manage more that 100 listings.
Many Australians have connections to multiple listings of Airbnb.
Prof Pettit stated that there will be people who use Airbnb as a major investment component (and who will suffer significant and be exposed).
“Some people will rent their property to long-term tenants. However, the return on that investment is much lower.” They may see rental returns drop by between 30-50 percent.
He stated that the shift to permanent residential from short-term Airbnb rentals was “good news” for Bondi, Byron Bay, and Hobart as well as the CBDs in Melbourne and Sydney.
Professor Pettit claimed that long-term residents were being forced out of desirable Australian neighborhoods in pursuit of Airbnb rents higher.
Dr Wilson stated that the market for property was already weakening before the coronavirus hit and that rental prices will likely fall further in the coming months.
“What looked like a nice little side-earner for those who bought apartments to convert into Airbnb investments … is just gone and it’s finished.”
Dr Wilson stated that international tourism is likely “on hold” for many years and predicted that Airbnb bookings will remain “subdued” if they aren’t empty for a while.
Airbnb was valued at $48 Billion a while back and is poised to record-breaking IPO in 2019.
The coronavirus has caused disruption in the startup industry disruptors in the hotel sector, so the highly anticipated IPO may not take place in 2020.
Airbnb laid off 25% employees in March following the collapsed travel industry.
Brian Chesky was the chief executive of the company and wrote to employees: “We collectively experience the most difficult crisis in our lives.”
Nine.com.au spoke with Susan Wheeldon, the Australian Country Manager for Airbnb. She stated that travel is resilient over the long-term and will eventually recover.
According to estimates, around 30% of Australia’s total sector is international tourism.
She stated that there is a strong rebound in people booking trips for later in the year.
Ms Wheeldon stated that there has been no drop in overall listings for Airbnb.
San Francisco’s tech giant, Airbnb, set up a US $25 Million emergency fund for hosts in March. Superhosts can also receive US $17million to help support the growth and expansion of Airbnb.