With the return of international travel earlier in 2022, we’ve seen a huge increase in bookings both in 2022 and looking forward in 2023!
Historically, the three largest source markets for tourists visiting New Zealand have been Australia, the United States, and China. However, with travel restrictions in place during 2022, the lack of visitors from China has been notably felt. With the recent reopening of borders for travellers from China and Hong Kong, the tourism industry in New Zealand is expected to see a significant boost.
As the short-term rental industry continues to see positive growth, we've compiled predictions for 2023 to showcase why now is the ideal time to invest in a short-term rental property. Discover our top reasons why 2023 is the year to capitalize on the potential of this industry below, or click here to get in contact with us for a free consultation.
There is still a demand and supply disparity happening for the short-term rental (STR) market in Auckland. Auckland City has approximately 65% of the STR stock that was available in early 2020 according to AirDNA (1,700 active rentals in 2020 compared to 1,100 now).
This is causing occupancy and nightly rates to further increase, which has created a huge opportunity as the market needs supply more than ever to help accommodate the demand going into 2023.
New Zealand is high on many international travellers bucket lists, heavily encouraged by the expansive marketing campaign Tourism New Zealand have been doing in the U.S, Australia and Europe. Travel demand to New Zealand has increased dramatically over the past year which is also causing demand for short-term rentals to further increase! International guests arriving in New Zealand are also increasing significantly in comparison to 2021 levels, visitor arrivals are currently 30% behind 2019 levels; the best it’s been in the past three years!
With many events scheduled in Auckland in 2023, including the Fifa Womens World Cup, both demand and average daily rates (ADR’s) are expected to increase dramatically for short-term rentals. At The Urban Butler, we are already seeing this demand with 15% occupancy rates for July and August 2023, and our ADR reaching $518!
3. Rental Market
There has been a decline in the number of traditional long-term renters such as international students, immigrants, and workers from overseas. While rents have remained static or slightly dropped in 2022 due to this, the future of the long-term rental market in 2023 remains uncertain, depending on whether these groups return.
Another difficulty landlords are facing is a decrease in suitable applicants for rental properties. With many people experiencing financial pressure, credit checks may reveal unpaid bills, making them less attractive to landlords. The scrapping of the interest on mortgages as a tax-deductible expense, coupled with surging interest rates, has made it less desirable for people to become long-term rental landlords.
4. Sales prices
Overall market sentiment, time on market and reduced values from the hype of 2020/2021, have also left many investors looking for an alternative to selling their property.
Looking at the REINZ data released in late January 2023, with average prices falling in December by 1.7% they now sit 15.1% below their November 2022 peak. Auckland prices have declined even further by 20%, it’s easy to see why!
This means that anyone who is selling really has no alternative and creates a potential bargain opportunity for those with cash in the bank.
5. Economic Factors
With interest rates still on the rise, long-term rental returns are being squeezed and, in many cases, just don’t stack up from a yield perspective. Inflation is currently at 7.2%, the highest it’s been since 1990, and with the cost-of-living increases creating an unaffordable living crisis, property owners are looking for other alternative measures of getting a return of their assets.
On the other hand, the short-term rental market is becoming increasingly more attractive. With higher rental income, less wear and tear on the property, lower vacancy rates and the potential for personal use, short-term rental allows you to maximise your investment returns whilst having the option to use your property when you wish.
In conclusion, the short-term rental industry is experiencing positive growth going into 2023, with high demand set against a low supply, this is causing nightly rates to increase, making 2023 the perfect time to invest in a short-term rental property. Additionally, the low demand and the high supply of the long-term rental market, coupled with the rise in interest rates, has made short-term rentals an increasingly attractive option for investors. Overall, 2023 is shaping up to be a great year for the short-term rental industry and a profitable opportunity for investors to capitalize on.
If you would like to discuss your property and how partnering with The Urban Butler works for your situation, we can help!
We partner with you in managing your property, and work together to understand what you need to maximise your investment. Our tailored management approach gives you the flexibility to be as hands on as you wish, or simply hand over the keys. Click here to get in contact with us for a free consultation or if you have any questions regarding our full short-term property management services.