Has the sun set on holiday rentals?

Tuesday 11 December 2018

With all the talk of increased council rates and compliance for short term rentals, do they still make investment sense? This month NZ Property Investor magazine investigates.

By The Landlord

Low rental yields and high entry price points across the country mean short-term holiday rentals look like a lucrative investment opportunity for residential investors.

But moves to tax profits on holiday rentals are becoming more and more frequent due to shortages in long-term rentals for locals and pressure on infrastructure.

Councils across the country have introduced, or are looking to introduce increased rates for short-term rental providers.

Yet, in spite of this the number of available properties in New Zealand, currently sitting at around 50,000, is still growing.

In Auckland the number of entire homes available for short-term stays has sky-rocketed from 694 listings in October 2015 to 3,840 in October 2018, according to AirDNA.

However, the percentage increase has slowed since Auckland Council introduced an Accommodation Provider Targeted Rate (APTR) for web-based holiday accommodation listings last year.

The APTR is applied to properties that book more than 135 nights a year (rated as businesses); those that book between 29 and 135 nights will be rated 75% commercial.

In Queenstown and Rotorua commercial rates are currently imposed on short-term rental accommodation providers under similar structures.

Other councils including Tauranga, Christchurch and Westland are poised to introduce similar systems.

In Queenstown a resource consent is required for some short-term accommodation; and a “bed tax”, which is a user-pays system is also being explored in both Auckland and Queenstown.

Infometrics senior economist Benje Patterson says there are several district plans currently under review, and we’ll get more detail as they are finalised.

So does short-term rental accommodation still make sense for investors? And, if so, where?

To find out more about how to make the short-term rental market work for you, click here to get the digital issue of NZ Property Investor magazine.

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Comments from our readers

On 11 December 2018 at 12:36 pm michaeljakob said:
At last some sanity in the world. I can see those who make the big bucks cringing at any attempt to curtail short term letting and having been through this as a neighbour I can assure all that short term letting is outrageously COMMERCIAL in every sense and really needs to be banned. Residential homes are places set aside for 'residential amenity', not 20 young bucks showing up for an all night party in select beachside areas. This has however been the experience. When people trying to live (exist) in their own homes we heard the routine "we have no legislation (they did!) from councils who were in bed with the local real estate industry who was making a very nice living out of this industry. What was never addressed is the many number of impacts on people who had bought a home to live in, which according to the zoning was not suitable as a commercial venture. This is what ALL short term letting is and the fact that it can work with the right tenants in small numbers belies the fact that family homes should not be or become defacto Function Centres. They did and all the vested interests worked hard to ensure the party would never end. It has. I congratulate NZ councils and (decent) governments for coming after this bad industry. Were they set up next door to those who make so much money out of it then they would never have been allowed to operate. As it is it was always ok for somebody else to suffer health issues but 'not in my backyard'. Well done to see significant regulation. More needed and if there is a need for this sort of accommodation then governments should build it away from the residential zone. But then regulation is exactly what this industry does not want.

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