Hundreds of landlords are moving from long to short term lets on Airbnb and other online outlets amid clear signs that many property owners are reacting to the more stringent regulatory and financial changes in the buy-to-let (BTL) market according to a property management firm.
DJ Alexander Ltd, one of the UK’s largest family-run property management businesses, believes that landlords are moving to short term lets to counter falling yields and in response to more complex regulatory changes but cautions against moving too quickly into a potentially volatile marketplace.
The Residential Landlords Association (RLA) said in a recent report that 7% of landlords were moving from long term to short term lets due to increased financial costs in the buy-to-let market. Airbnb reports that they have 168,000 listings across the UK earning £657m in the last year for the hosts and contributing £3.46bn to the wider economy.
Additionally, Airbnb states that 76% of their hosts rent out their primary home which would indicate that 24% (or around 40,000 listings) are not using their home but a secondary property. The growth of Airbnb has been extraordinary with the RLA reporting a 60% annual increase in London listings alone.
David Alexander managing director of DJ Alexander Ltd, explained: “The recent regulatory and financial changes in the BTL market have made it more difficult for landlords to earn a good yield which, coupled with increasingly complex regulatory challenges, is causing many to rethink their options. It is understandable, therefore, that many may 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. But you need to realise that your lender must be told if you are making this change; your insurers needs to be informed; there may be considerable dead periods when you aren’t earning; the maintenance costs will be higher as you have beds to change and properties to clean; and Airbnb, although in the ascendant at the moment, 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”
David continued: “You may find that you make more money from April to September but that the winter is completely dead in which case your earnings may balance out. The problem is that there is more work involved in dealing with 50 guests a year than in two permanent clients staying for a year. It is a balance and will depend on your expectations, your current experience of where your property income is going, and your location.”
Although Airbnb listings are across the UK there are four key areas where the majority are located: London; Scotland; South-West; and South-East which collectively account for 75% (126,100) of all listings. Of greater interest is that these four areas account for 84% (£552m) of all income generated for hosts in the UK.
David concluded: “These figures highlight the importance in short term letting of having a rental property in the right area. Interestingly, Airbnb states that Scotland has the highest average annual ratings of anywhere in the UK at £3,600 per year and it would be fascinating to know how much of this was generated in Edinburgh during August. 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. These are a lot of factors to consider so I would urge landlords thinking of this step to think long and hard before making a leap into the unknown. It will work for some but could be a mistake for others.”