Proposed regulatory and financial changes to the status of Airbnb in Scotland and Bristol should be regarded as a warning to Scottish landlords considering moving their properties into the holiday letting market, according to apropos by D.J. Alexander. They believe that many Scottish landlords have been tempted to shift their properties onto short-term holiday letting as the returns on traditional letting have diminished. However, proposals in Scotland and Bristol, aimed at curbing the growth of Airbnb and other holiday letting outlets, could impact on the future viability of many properties.
In Scotland Airbnb have 31,000 active listings earning £129m and average annual earnings of £3,800, which are the highest of any part of the UK.
Airbnb say they have 223,200 active listings in the UK, generating £854m with average earnings for the owners of £3,100 per year. The growth in some parts of the UK has been substantial with Edinburgh, for example, now having over 12,000 hosts, which has doubled in the last three years.
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 73% (163,300) of all listings. Of greater interest is that these four areas account for 78% (£666m) of all income generated for hosts in the UK.
David Alexander, joint managing director of apropos, commented: “Many landlords have felt tempted toward short-term letting with its potentially higher returns at a time when margins in the private rented sector (PRS) are being squeezed. This financial squeeze, coupled with government cuts to tax reliefs, has meant that many landlords have viewed Airbnb as an attractive option. But the proposed changes in Scotland and Bristol to the way in which the holiday lettings market is regulated could produce more problems than traditional long term letting.”
“Additionally, Airbnb do appear to be targeting this market by highlighting potential substantial earnings for owners who join their site. Although their official data states that average earnings for Airbnb hosts are just £3,100 per year - which is unlikely to attract many landlords - , they also provide potential revenues specifically for different cities, which are much more appealing. For example, they state that property owners in Edinburgh could earn £1,451 a month; in Glasgow £1,294, in Dundee £1,043, and in Aberdeen £1,003 with differing figures across the UK. These numbers will appear very attractive to landlords who have falling rents in real terms, lower tax incentives, and increased management and maintenance costs.”
David continued: “There are, of course, pluses in short-term letting on Airbnb and other websites. The daily income is higher than long-term letting; to date, there have been fewer legislative, financial and regulatory issues, and it can be less punitive, in some circumstances, for borrowing. But the announcement that Scotland and Bristol are going to attempt to control the growth of holiday lettings is a clear warning sign for anyone considering shifting into this market.”
“If restrictions are imposed on how many days properties can be let, or limits on the areas in which properties can operate, then clearly this becomes a less tenable option. Even without these proposed curbs on holiday lets the market is tricky. With Airbnb you may find that you make more money for the peak five or six months of the year, but the winter is completely dead, in which case your earnings may balance out. A further 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.”
David concluded: “It is clear that Airbnb and other holiday lettings outlets are attracting a lot of negative publicity due to their enormous expansion over a relatively short period. They undoubtedly provide a service, but the light touch regulation, which they have enjoyed to date, is unfair to existing landlords and property providers. Therefore, the introduction of greater regulation and control is welcome and inevitable, and should make landlords and others think clearly about whether holiday letting is the way forward or simply a temporary blip in the market. The genie is out of the bottle, so Airbnb will be with us for a long time but perhaps not operating in the way they have so far.”