In a world where everyone’s a real estate investor, the competition is fierce and the stakes are high. But lately, it seems like every Tom, Dick, and Harry is trying to make a quick buck by listing their properties on Airbnb. From dingy basements to swanky penthouses, it seems like no property is safe from the Airbnb invasion.
But here’s the thing: when you hear literally everyone talking about being an Airbnb host, and everyone is turning their properties, shitty or nice, into Airbnb rentals, you can be pretty sure that the market is headed for a bust/collapse/correction. It’s basic supply and demand: when everyone is offering the same thing, prices go down, and occupancy rates plummet. It’s like a game of musical chairs, and when the music stops, you don’t want to be left without a seat.
If you’ve bought an investment property based on proforma numbers that reflect the high rental rates and high occupancy rates of a booming market (and may have overpaid for the properties substantially as a result), you’re in for a HUGE negative surprise when the inevitable market correction happens. But don’t just take my word for it – let’s take a closer look at the data.
According to AirDNA, a company that tracks Airbnb data, there are over 7 million active listings worldwide, and the number is growing every day. In some cities, like Paris and New York, Airbnb listings make up a significant portion of the total housing stock. In Paris, for example, there are more Airbnb listings than there are affordable housing units. And as more and more people get in on the action, the competition for guests heats up, and the profits start to dwindle.
It’s not just a matter of oversupply, either. There are a number of other factors that could contribute to an Airbnb bust. For one thing, local governments are starting to crack down on short-term rentals, citing concerns about noise, safety, and the impact on housing affordability. In some cities, like Barcelona and Amsterdam, Airbnb hosts are required to obtain a license or face hefty fines. And in places like New York City, it’s illegal to rent out an entire apartment for less than 30 days.
Another problem is that Airbnb has become a victim of its own success. The company started out as a platform for homeowners to rent out a spare room or two, but now it’s dominated by commercial operators who own multiple properties and use Airbnb as a way to circumvent local regulations on hotels and other lodging options. This has led to complaints from neighbors about rowdy tourists, and a general feeling that Airbnb is disrupting the fabric of local communities.
So, what can real estate investors do to protect themselves from the coming Airbnb bust? One option is to avoid short-term rentals altogether and focus on long-term leases. This may not be as lucrative as Airbnb in the short term, but it offers more stability and less risk in the long run. Another option is to look for untapped niches in the market – properties that cater to a specific demographic, like luxury travelers or families with young children. By creating specialty properties that stand out from the crowd, investors can reduce their exposure to market fluctuations and differentiate themselves from the competition.
At our development company, we’ve always prided ourselves on our ability to read the market and stay ahead of the curve. We don’t just follow trends – we create them. That’s why we’re confident that the AirBNBust won’t be a problem for us.
