Analysis: Short-term rentals not the main drivers of NZ housing challenges

New analysis by leading New Zealand economic consultancy Infometrics has found that the short-term rental accommodation (STRA) sector has a limited effect on rental prices and no significant effect on house prices across New Zealand’s major urban areas, with population and interest rates having the greatest influence on rents and house prices. 

The independent expert study, commissioned by Airbnb, identified a range of factors that could influence and impact rental prices and house prices, including population growth, interest rates, incomes, STRA numbers (sourced from AirDNA), and more. These factors were analysed to determine the influence any factor had on rents and house prices.  

“Our analysis shows that population growth and interest rates had the greatest influence on rental prices in the areas we analysed,” says Infometrics Chief Executive and Principal Economist Brad Olsen.

“When we looked across the range of possible factors that could influence rental prices, STRA only had a limited influence on rents and no real influence on house prices, providing some important evidence to add to the debate about housing, rents, and the STRA sector.

“The New Zealand housing market fundamentally suffers from a lack of supply, which has caused house prices and rents to rise over time.”

Focusing on the Auckland, Wellington City, Queenstown-Lakes District, and Christchurch City territorial authorities, an econometric analysis found the main drivers of rental and house price increases are population growth and interest rates. 

“For example, our analysis for Queenstown-Lakes District found that STRA contributes negligibly to monthly rental price increases, with the average amount being an additional 35c/month. Over the period January 2018 to September 2023, population growth influenced around a $101pw increase in weekly rent, while STRA only influenced $11pw,” says Mr Olsen. 

“Although people often focus on STRA as a key reason for higher rents and housing costs in some areas, this analysis clearly finds other factors have a much greater influence.

“Our model looked at house prices and rental prices over time, relative to changes in other factors that can influence the housing market. Population came out as the factor that had the greatest influence on rents, with mortgage rates also having a noticeable influence. However, when we controlled for all these other variables, our econometric analysis showed that the STRA influence on rents was very limited.

“We also highlighted that there has been a historic shortage of new properties, coupled with record migration, low borrowing costs, and high construction costs.”

The analysis also found that prior to the pandemic, the combination of strong population growth, low mortgage interest rates, and insufficient supply of new housing resulted in house price inflation in New Zealand peaking at 15 percent pa in the June 2016 quarter, compared with a 1.9 percent pa increase in household incomes.

“Airbnb welcomes collaboration with governments on sensible regulations for our sector, and this new analysis demonstrates that if we are to solve housing affordability challenges, we need tailored solutions that get the balance right,” says Airbnb Country Manager for New Zealand and Australia, Susan Wheeldon.

“Short-term rentals are not the main drivers of the housing challenges being faced in cities and towns across the country and it is important we adopt the right approach to ensure hosting on Airbnb and the economic activity it creates makes communities stronger.

“Even in Queenstown, Airbnb’s influence on annual rental prices is less than the cost of a takeaway coffee. Yet, our economic contribution is significant with Airbnb injecting $2.8 billion into New Zealand’s GDP and supporting over 22,000 jobs.

“We want to continue to work with governments and communities to implement consistent nationwide rules as the most sensible way to regulate short-term rentals through initiatives like property registration schemes so a sustainable approach can be adopted that benefits both communities and industry.”

To see Airbnb’s existing proposals for regulations for the sector visit this link. 

Infometrics was commissioned by Airbnb to conduct the independent analysis which can be found in full here.