Is now the right time to delve into the short-medium term rental market?

by: Brian Hall

Having been fortunate to be in the Airbnb hosting arena for the past five years now, I have found there are some significant trends regarding the best strategy for use, best locations, amenities to provide, and so forth. Nothing excited me more while opening more homes to use than the trend of remote work that began during the Covid-era. Moreover, it is still performing strong all over our region; and throughout the country as best as I can tell. 

Some of the great things about this increased demand are the opportunity to meet diverse groups of people, contributing to the local economy, and the potential for high returns on investment. However, recently, I've started to notice a shift in the dynamics of the market, with signs pointing to a possible downturn.

The boom in remote work has led to a surge in the demand for medium-term rentals. According to a recent study by AirDNA, a company that provides data and analytics to vacation rental entrepreneurs and investors, there was a 150% increase in bookings for stays of 28 days or more from 2020 to 2023. Many digital nomads and remote workers are now opting for this type of accommodation over traditional monthly rentals, as it offers more flexibility and amenities.

However, the increased demand has also led to a substantial rise in supply. As of June 2023, there are over 7 million listings on Airbnb worldwide, a staggering 80% increase from the 3.9 million listings available in 2019. Locally, the latest numbers in Richmond City are closing in on 1000 from only 400 in Q1 of 2020, a whopping 150% increase! This saturation of the market has resulted in stiff competition among hosts, leading to downward pressure on rental rates and potentially lower returns on investment.

Adding to these challenges are the regulatory hurdles that have been put up in many jurisdictions. Municipalities across the globe are introducing rules and regulations that make it more difficult to operate short-term rentals. For example, in San Francisco, new regulations require hosts to register with the city and limit the number of days a property can be rented out each year. Other cities, like Barcelona and Amsterdam, have also clamped down on short-term rentals due to concerns over housing affordability and neighborhood character preservation. Locally, we face increased hurdles including stiff fines and penalties if not in compliance with regulations beginning on August 1. 

This combination of increased competition, lower prices, and tighter regulations might suggest that now is not the best time to invest in the short and medium-term rental market. But it's important to remember that these conditions vary significantly by location. In areas with strong tourism demand and favorable regulations, investing in short and medium-term rentals can still be profitable. 

In conclusion, although the landscape of the rental market has become more challenging, opportunities still exist for savvy investors. Careful research and a thorough understanding of the local market are key to making successful investments in the current environment. Remember, timing the market perfectly is less important than understanding the market you're in. 

I have had more conversations with investors in the last 2 months where i have recommended holding off on setting up a new medium-term rental than I have in the past 2 years combined; but that said, the right opportunities are still out there for people who keep their eyes open.

If you have questions about this market and how to capitalize on it, please do not hesitate to reach out to me and schedule a quick chat.

I look forward to speaking with you soon!