“We have had record month after record month since July. For the inner-city apartments, we have back-to-back bookings. It’s been amazing.”

Jenny Parkes, business manager at short-term accommodation management company Relaxaway, is delighted Queenstown is back in business. She’s been with the company for 10 years and admits that since Covid-19 hit in 2020 the industry has been volatile.

“The month before Covid-19 lockdowns was the biggest month we ever had,” she says. “Then everything shut down straight after. It was incredibly tough.”

But while there has been a lot of noise around the number of investors who “pivoted” to long-term when their holiday rental revenue was decimated by Covid restrictions, Parkes says most of their clients just waited it out.

“Our clients are lucky enough to be able to afford to keep their homes empty during lockdown,” she says. “We have a sister company that does long-term rentals in the area and maybe around three of our clients moved over, but not many. Now they are incredibly happy about how well things are going.”

Although Covid is still with us, the restrictions have gone. And this freedom offers investors the chance to move any properties not tenanted into the short-term market again. But is it (pre-Covid) business as usual? Or is the short-term market too much of a gamble for investors?

LONG-TERM RENTALS

While Parkes’ recent experience of the market has been positive, shortterm rentals were at the forefront of challenges posed by the pandemic. When borders were closed from March 2020 until August this year, the flood of international visitors dried up.

At home, New Zealand was in lockdown. Auckland was hardest hit, and for months this lucrative domestic market was unable to be tapped. Many investors, worried about the future of their holiday homes, did move to longterm rentals.

AirDNA data around the shrinkage of the short-term rental market is illuminating. On September 19, 2019, NZ had 23,126 properties available online for holiday rental. By September 19, 2020, there were just 17,808.

Auckland properties dropped off at the highest rate: between 2019 and 2022, the city experienced a 44 per cent drop in available properties. Christchurch city was close behind, with a 42 per cent drop in the same period.

It’s interesting to note that Queenstown remained comparatively stable. There was a 15 per cent change in available homes (1,858 in September 2019 compared to 1,581 in September this year), but it’s also interesting the demand for homes in this region increased 23 per cent between 2019 and 2022.

“We didn’t see people selling their properties in Queenstown over Covid lockdowns,” says Parkes. “Our clients tend to be affluent, and they preferred to leave the properties empty rather than selling or moving to long-term rentals.”

AIRBNB MODEL

Not everyone held on to their properties, however. Sam Barnett, based in Rotorua, was one of the earliest investors to embrace the Airbnb model.

In the mid-to-late 2010s he had five holiday rentals in the district, and eyewatering yields of around 50 per cent. They were so successful that the profits enabled him and his partner to buy their dream home on the banks of the lake.

But the golden weather didn’t last. During the border closures they renovated each home in turn and rented each of them long-term. They currently have only one short-term holiday rental, adjacent to the family home.

“We kept hold of it because it’s where we live and it’s easy to manage. It’s booked-out until next April.”

BUSINESS BOOMING

In nearby Taupo, Paul Penhearow of short-term property management firm Your Space, says business is booming. He purchased the business in December last year and says the company was in a “reasonable position” over the Covid-19 period.

“We are very fortunate that the Taupo market is known for predominately domestic travel, around 80 per cent is from New Zealand,” he says. “So, the market has been quite steady and strong, buffered by people coming here from around the North Island.”

Penhearow says the business has grown by around 25 per cent since he took over, with many Auckland-based investors purchasing properties in the area to put on the short-term market.

“It is priced well for investors, compared to the rest of the country,” he says.

“Many owners use these as their own holiday homes and cover their costs by renting to visitors.”

CHANGING FACE OF HOLIDAY RENTALS

The short-term holiday market changed significantly between September 2019 and September 2022, but not always for the worse. Some central New Zealand centres, such as Thames Coromandel and Taupo actually experienced a significant lift in demand.

Three-bedroom, two-bathroom homes, in sought after locations, will fetch between $300-$500 a night on average, and this can increase at certain times of the year.

“We always see an upswing in the school holidays and when there is a special event,” he says.

“Most of the visitors are New Zealand based, but when the borders to Australia reopened we started seeing an influx of visitors from Australia, which has continued.”

TURBULENT TIMES

Auckland’s short-term rental market has been particularly turbulent. But Rex Demanser, of The Stay Hub, which manages short-term holiday rentals in Auckland and Taupo, says the properties they manage perform extremely well.

He attributes this to several factors. The movement of short-term rentals into the long-term market created a dearth of accommodation options in Auckland. And while the country was restricted from travelling the world, people began to move their focus to creating their own slices of paradise in their backyards. Renovators needed somewhere to stay, and these properties fit the bill.

An increase in domestic travel when the country wasn’t locked down also created demand. And with limited stock available in Auckland in particular, prices went up.

Now, at the end of 2022 with borders open and fewer properties available to rent, the market is sizzling.

“We have a three-bedroom home in Westmere that was making $1200-$1500 a week as a long-term rental,” he says. “Now it’s making $1200 a night.”

ABOVE Short-term property managers can be a hassle-free alternative for landlords.

BELOW Low levels of long-term rental stock in Queenstown Wanaka has caused issues for the migrant workforce.

Many of the properties managed by The Stay Hub are becoming available as Kiwis move back overseas, keeping their Auckland homes as short-term rentals.

There seems to be a growing awareness that property management companies can take the hassle out of this. “It makes the process worry free,” says Demanser. “People who were previously self-managing have grown tired of it and turn to the likes of us to manage everything for them.”

TIGHTER REGULATIONS

The regulations around short-term rental properties became tighter pre-Covid. Councils cottoned on to the fact that investors where using houses that would have been long-term rentals as holiday homes for travellers. This created issues with neighbours and there was a perceived shortfall of available long-term stock. This, in turn, led to rents sky-rocketing.

Queenstown was ground zero for many of these issues. With an itinerant migrant workforce there were horror stories about people living in extremely cramped and unsanitary hovels as rental prices jumped.

Queenstown Lakes District Council put strict rules in place in 2019, which apply to anyone providing holiday home accommodation for more than 90 nights a year.

“If people are renting out their property for more than 90 nights a year, resource consent is required,” says Jenny Parkes of Relaxaway. “And depending on the property, this can be hard to get.”

Up north, Auckland Council will start to charge business rates for properties used as short-term rentals for more than 28 nights a year in the 2022/23- year. If only part of your property is used for this, a portion of the property may be charged business rates, and the remainder residential rates.

There are also tax obligations. IRD has special tax rules that apply to calculating income and expenditure from short-term rental accommodation, depending on the type of property and its use.

And if you are renting out a short-term property and the turnover is over $60,000, GST is payable. This doesn’t apply to providers of long-term rental properties.

‘WAIT AND SEE’

It will be interesting to see if the influx of visitors from overseas this summer leads to a large increase in short-term rentals in the country. The more likely scenario
is that as tenants move out of long-term rentals, previously used as holiday rentals, the owners may reconsider returning them to the short-term market.

Barnett may use this “wait and see” policy for his own Rotorua rental. “It’s actually easier doing long-term,” he says. “But we have a tenant moving out and we haven’t found a new one yet, so we may move that property back on the holiday rental market.”