Australia’s property market continues to evolve, driven by changing consumer preferences, technology, and economic shifts. Whether you’re a seasoned investor or just stepping into the real estate arena, one critical decision you’ll face is this: Should you opt for short-term or long-term rentals?
This comprehensive guide will help Australian property owners weigh the pros and cons of both rental strategies. We’ll explore factors like revenue potential, legal considerations, tenant management, and market trends across major cities like Sydney, Melbourne, Brisbane, and coastal tourist hotspots like the Gold Coast and Byron Bay.
Understanding the Basics
What Are Short-Term Rentals?
Short-term rentals (STRs) are properties leased out for brief periods—typically from a single night up to a few weeks. These are commonly listed on platforms like Airbnb, Stayz, or Booking.com. They’re ideal for holidaymakers, business travellers, or people relocating temporarily.
What Are Long-Term Rentals?
Long-term rentals (LTRs) involve leasing a property for several months or years, usually through a residential tenancy agreement. These are the traditional form of property leasing, with tenants staying for 6 to 12 months or longer.
Pros and Cons of Short-Term Rentals
✅ Pros
1. Higher Income Potential (in Peak Seasons)
In popular tourist destinations like the Gold Coast, Cairns, and Sydney’s Eastern Beaches, STRs can generate significantly more income during peak seasons compared to LTRs.
2. Flexibility for Owners
Owners can block off dates for personal use or maintenance—something not easily done with LTRs.
3. Tax Deductions
Expenses like utilities, internet, cleaning services, and platform fees are deductible. Some hosts may also benefit from depreciation claims on furniture and fittings.
4. Lower Wear-and-Tear Risk with Regular Cleaning
Because properties are cleaned frequently between guests, issues can be identified and addressed promptly, potentially extending the property’s lifespan.
❌ Cons
1. Seasonal Revenue Fluctuations
STR income is highly dependent on location, time of year, and events. For instance, a Melbourne CBD apartment might flourish during the Australian Open but drop off afterward.
2. Higher Operational Costs
You’ll need to cover cleaning, restocking, guest communications, and possibly professional management services.
3. Council and Legal Restrictions
Cities like Sydney and Byron Bay have implemented caps on the number of days a property can be used for STRs. STRs may require registration and compliance with safety regulations.
4. Greater Time Commitment
Hosting is a part-time job. Answering guest queries, handling key exchanges, and managing reviews can be time-consuming without a co-host or property manager.
Pros and Cons of Long-Term Rentals
✅ Pros
1. Stable Income
You receive consistent monthly payments, regardless of the season. This is appealing in areas with lower tourism traffic.
2. Lower Management Effort
Once a tenant is secured, you won’t need to worry about constant turnover, key handovers, or housekeeping.
3. Reduced Running Costs
Utilities and internet are usually covered by the tenant. There’s also less frequent need for furniture replacement and restocking.
4. Tenant Protection Laws Offer Clarity
While some see tenancy laws as limiting, they also provide a clear legal framework to resolve issues, offering peace of mind.
❌ Cons
1. Lower Profit Margins
LTRs generally yield less monthly income than STRs, especially in high-demand short-stay locations.
2. Limited Property Access
You can’t use your property for personal stays. Access for repairs or updates must follow legal procedures and notice periods.
3. Tenant Risks
Problematic tenants—late payments, property damage, or lease breaches—can be costly and time-consuming to resolve.
4. Slower Adaptability to Market Conditions
You can’t quickly adjust your rental price or switch strategies when the market changes, as you’re bound by a fixed lease agreement.
Financial Comparison: Short-Term vs. Long-Term Rentals in Australia
| Criteria | Short-Term Rental | Long-Term Rental |
|---|---|---|
| Monthly Income Potential | Higher (varies by season) | Lower but stable |
| Occupancy Rate | 40–80% depending on location | 90–100% once leased |
| Management Costs | High (up to 20–30% with managers) | Low (typically 5–10%) |
| Furnishing Required | Fully furnished | Optional |
| Cleaning Costs | Frequent | Occasional (end of lease) |
| Legal Complexity | Medium to High | Low to Medium |
Location Matters: A State-by-State Perspective
✅ New South Wales (Sydney, Byron Bay)
- Short-term appeal: High, especially near beaches and city hubs.
- Regulations: Capped at 180 nights per year for non-hosted STRs in many council areas.
- Long-term viability: Strong due to ongoing housing demand.
✅ Victoria (Melbourne)
- Short-term appeal: Strong in CBD and inner suburbs during events and holiday periods.
- Regulations: Short-term leasing is allowed, but body corporates may impose restrictions.
- Long-term viability: High rental demand, especially near universities and hospitals.
✅ Queensland (Brisbane, Gold Coast, Sunshine Coast)
- Short-term appeal: Excellent, especially in coastal regions.
- Regulations: Varies by council; some areas like Noosa and Brisbane are tightening controls.
- Long-term viability: Consistent demand due to interstate migration.
✅ Western Australia (Perth, Margaret River)
- Short-term appeal: Growing, with tourism pushing STR growth.
- Regulations: Registration required; caps in place in some LGAs.
- Long-term viability: Moderate to strong, especially in suburban family markets.
Who Should Choose Short-Term Rentals?
Short-term rentals are ideal for:
- Properties in tourist-heavy areas (e.g., Cairns, Gold Coast)
- Investors comfortable with variable income
- Owners seeking flexibility for personal stays
- Hosts with time or property managers to run operations
Who Should Choose Long-Term Rentals?
Long-term rentals are ideal for:
- Investors seeking stable income
- Owners without the time or inclination to manage guests
- Properties in suburban or non-tourist locations
- Regions with strong population growth and housing demand
Blended Strategy: The Best of Both Worlds?
Some property investors in Australia are opting for a hybrid model:
- Renting short-term during peak season (e.g., school holidays, summer)
- Leasing long-term during quieter months
This works best in flexible council zones and when a property can easily pivot between furnished and unfurnished configurations.
Legal Considerations and Compliance
- Insurance: STRs require specialised insurance—standard landlord policies may not cover guest stays.
- Licensing: In some states, STR hosts must register or obtain approval from local councils.
- Tax Implications: STRs may impact your eligibility for the main residence CGT exemption.
- Tenancy Law: LTRs fall under state-based residential tenancy acts—know your rights and responsibilities.
Technology and Tools to Help You Decide
Modern tools can help simplify decision-making:
- AirDNA or PriceLabs: Forecast STR income potential
- Domain and SQM Research: Offer LTR rental market insights
- Property management platforms: Automate bookings, guest messaging, and pricing adjustments
Final Thoughts: Short-Term or Long-Term Rentals?
There’s no one-size-fits-all answer. Your decision should depend on your location, lifestyle, income goals, risk tolerance, and willingness to manage a property actively.
Key Takeaways:
- Choose short-term rentals for higher income potential and flexibility—but expect more work.
- Choose long-term rentals for stability and ease—ideal for passive investors.
- Hybrid models can offer balance, particularly in seasonal markets.
Whichever path you choose, being informed, adaptable, and compliant will help you maximise returns from your investment property in the ever-evolving Australian rental landscape.
Want Help Managing Your Rental Property? At UniqueBNBHosts, we specialise in helping Australian property owners optimise their rental strategy—whether short-term, long-term, or a blend of both. Contact us today for a free consultation.
