Airbnb Australia boasts over 70,000 listings across the country, from city apartments to rural getaways. However, this thriving short-term rental market faces unprecedented challenges as councils and state governments implement stricter regulations, including 180-day caps in Greater Sydney and similar proposals for Melbourne.
How does Airbnb work within this changing regulatory landscape? The platform currently operates against a backdrop of rising insurance premiums, increased compliance costs, and a significant four-year ban on foreign property buyers that began in April 2023. Consequently, many property owners are reconsidering the viability of short-term rentals, with some returning to the long-term rental market. This shift partly stems from Australia’s growing housing shortage and high rental prices, prompting regulators to prioritise accommodation for residents rather than tourists.
This guide examines the evolving Airbnb Australia landscape, breaking down the state-specific regulations, financial considerations, and future outlook for property investors in 2025.
Why Airbnb Took Off in Australia
Since its 2012 launch in Australia, Airbnb has experienced remarkable growth, with hosts accommodating approximately 2.1 million guests for 3.7 million nights in 2015-16. This popularity comes from several key factors that made Airbnb Australia particularly attractive to property owners across the country.
High returns in tourist hotspots
The financial appeal of Airbnb properties remains undeniable. Research shows operators earn 81% more through short-term rentals compared to traditional rental arrangements. This substantial difference helps explain why investors eagerly entered the market. In Western Australia, Wanneroo emerged as Australia’s most profitable suburb, where homeowners generated potential average profits of AUD 8998.11 monthly—a 69% profit margin and AUD 10180.02 more monthly than traditional renting.
Furthermore, the average Airbnb host in Australia earned a median income of AUD 7522.63 in 2015-16, providing meaningful supplemental income. This pattern extends across the country, with South Australia boasting the highest average earnings at AUD 480.10 nightly and AUD 39545.80 yearly.
Flexibility for property owners
Beyond financial benefits, Airbnb offers property owners unprecedented control. According to Airbnb, over 80% of hosts across Australia share homes they actually live in, demonstrating the platform’s appeal to ordinary homeowners seeking additional income.
Notably, hosting helped 42% of Queensland hosts afford to stay in their homes, with one-third citing “making ends meet” as their primary motivation. The platform particularly empowers specific demographics—67% of Queensland hosts are women, while 24% are 60 years or older.
Additionally, owners maintain complete control over their property’s availability calendar, allowing them to block off dates for personal use or maintenance. This flexibility represents a great advantage over traditional investment approaches.
Post-COVID travel rebound effects
Despite pandemic disruptions, Airbnb Australia demonstrated remarkable resilience. While Airbnb guest spending in Australia fell by only 11% between 2019 and 2020, the broader Australian travel and tourism sector experienced a steeper 28% drop.
The recovery phase revealed shifting travel patterns. The percentage of rural nights booked in Australia jumped dramatically from 18% in winter 2019 to 42% in winter 2021, indicating a significant preference shift toward regional destinations. This dispersal trend benefited areas without traditional hotel accommodation.
By 2022, Airbnb contributed AUD 20.79 billion to Australia’s GDP (equivalent to 0.55% of total GDP) and supported 94,700 jobs nationwide. Specifically, one in every 14 jobs generated by tourism in Australia is now associated with Airbnb, demonstrating the platform’s growing economic importance beyond direct accommodation.
New Local Rules and State-Specific Regulations
Across Australia, state governments have implemented varied regulations to manage short-term rental accommodation (STRA). These rules significantly alter how Airbnb properties operate throughout the country.
NSW: 180-day cap and planning proposals
Non-hosted short-term rentals in Greater Sydney face a 180-day annual limit, with similar restrictions applying to Ballina, parts of Clarence Valley, and Muswellbrook. Meanwhile, Byron Shire will enforce a stricter 60-day cap starting 23 September 2024, though properties within two designated precincts in Byron Bay Town Centre and Brunswick Heads remain exempt. All hosts must register their properties through the NSW Government’s STRA portal before advertising or accepting bookings.
Victoria: Melbourne’s 180-night limit
The City of Melbourne has moved towards introducing a 180-night annual cap for short-term rentals. This proposal aims to address Melbourne’s rental vacancy rate of just 0.8%, well below the healthy 3% threshold. Moreover, beginning in January 2025, Victoria will implement a 7.5% consumer levy on all short-term accommodation bookings. Several councils already enforce registration fees, including Bass Coast Shire (AUD 458.70), Frankston (AUD 229.35), and Mornington Peninsula (AUD 475.52).
Queensland: Council rate hikes and strata restrictions
Brisbane City Council introduced a 50% rate increase for properties listed as short-term accommodation for more than 60 days annually. This measure, effective since July 2022, adds approximately AUD 794.31 to the average annual rates bill. Additionally, property owners will soon need permits requiring planning approvals, body corporate support, and a 24-7 property manager. Currently, strata communities cannot prohibit short-term letting through by-laws.
South Australia and WA: Development approvals and zoning
Western Australia launched a mandatory registration system for all short-term rentals, requiring registration by 1 January 2025. Perth metropolitan properties benefit from a 90-night exemption from development approval requirements for unhosted rentals. Outside these areas, regional councils determine their planning requirements. South Australia operates through a development application register where property owners must seek approvals based on local zoning regulations.
The Financial and Legal Realities of Hosting
Behind Airbnb hosting’s allure lies a complex landscape of financial obligations and legal responsibilities that many property owners discover only after they’ve listed their properties.
Insurance gaps and rising premiums
Standard homeowner and landlord insurance policies typically exclude short-term rentals, creating significant coverage gaps. Insurers often consider hosting paying guests a commercial activity, leaving hosts exposed to potential financial losses and legal liabilities. Although Airbnb offers “AirCover for Hosts,” this programme has notable limitations—it doesn’t cover cash, securities, pets, or personal liability. It offers only limited protection for valuables like jewellery and artwork. Consequently, hosts must secure specialised short-term rental insurance, which has seen premiums rise substantially in recent years.
Registration and fire safety compliance
Local councils across Australia now require hosts to complete formal registration processes, obtain planning approvals, and undergo detailed fire and safety checks. In NSW, hosts must register on the government’s STRA portal and pay an initial fee of AUD 99.38 plus an annual renewal fee of AUD 38.22. Properties must also meet strict fire safety standards, including interconnected smoke alarms with 10-year battery life, evacuation diagrams, and accessible fire extinguishers in kitchens. Failure to comply can result in registration revocation, fines, or even a five-year industry ban under the “two-strike” system.
Volatile income and seasonal demand
Unlike traditional tenancies with stable monthly income, Airbnb earnings fluctuate dramatically based on seasonality, competition, and economic conditions. Essentially, short-term rentals operate more like small businesses than passive investments, requiring active management and adaptation to market changes. This volatility became starkly apparent during COVID-19 when tourism collapsed virtually overnight.
Landlord consent and subletting laws
Tenants cannot legally sublet through Airbnb Australia without written landlord permission. Australian courts have consistently ruled that Airbnb arrangements constitute subletting rather than lodging arrangements. Unauthorised subletting breaches tenancy laws and lease agreements, potentially resulting in eviction. Landlords can seek compensation for profits derived from unauthorised subletting, provided evidence exists. Regardless, landlords must provide reasonable justification if sublease requests are refused from tenants.
What This Means for Property Investors in 2025
The property investment landscape for Airbnb hosts is undergoing fundamental shifts as 2025 unfolds. With stricter regulations and changing market dynamics, investors face a substantially different environment than just a few years ago.
Yield compression and rising costs
The once-lucrative returns from short-stay platforms are under increasing pressure as compliance costs rise and regulations tighten. The yield gap between short-term and long-term rentals is narrowing considerably after accounting for taxes, fees, and vacancies. In fact, approximately three-quarters of asset value growth in recent years has come from yield compression rather than income growth. As Victoria implements its 7.5% levy and other states introduce registration requirements, the financial calculus for many hosts has changed dramatically.
Shift back to long-term rentals.
Indeed, many Airbnb owners are now returning to the long-term rental market. Data shows a spike in rental listings in regions that previously had high short-stay volumes. This shift partly explains why Australia’s median rent hit another record high at AUD 918.92 per week in early 2024, up from AUD 668.17 in August 2020. For some property owners, the stable income of traditional tenancies has become more attractive than the unpredictable earnings of short-term rentals.
Increased competition in rental listings
The rental market is simultaneously experiencing increased competition as more properties transition from short-term to long-term arrangements. This trend benefits tenants but creates challenges for landlords trying to stand out. In tourist hotspots, short-term rental listings grew approximately 11% last year, forcing average properties to compete primarily on price.
Reassessing asset strategy and location
Savvy investors are thus reassessing their property strategies with several considerations:
- Evaluate whether the numbers still work after new costs and rules
- Consider location-specific demand patterns, as not all properties are viable as short-term rentals
- Explore emerging property corridors with infrastructure developments
- Factor in property type, as different asset classes experience varying levels of value growth
Presently, the property investment landscape favours those who can adapt quickly to these changing conditions.
Conclusion – Airbnb Australia
Australia’s Airbnb landscape stands at a crossroads in 2025, fundamentally reshaped by the regulatory frameworks now established across all states. Property owners consequently face a more complex decision-making process when considering short-term rental investments. The once-substantial financial advantage of short-term rentals has narrowed significantly due to rising compliance costs, insurance premiums, and council rates.
Furthermore, the market itself continues to evolve rapidly. Competition among listings has intensified, while yield compression affects property values across the board. Therefore, many owners have already transitioned back to long-term rental arrangements, seeking stability over potential high returns.
Looking ahead, successful Airbnb hosting will require a much more strategic approach than previously. Property investors must carefully assess location-specific regulations, calculate actual costs, including insurance gaps and compliance requirements, and evaluate seasonal demand patterns. Additionally, they should consider emerging property corridors that might offer better investment potential.
Related: Housing Affordability in Australia: What It Means for Buyers & Investor
What are the key changes to Airbnb regulations in Australia for 2025?
New regulations include mandatory registration for short-term rental properties, with a deadline of 1 January 2025. Some areas have introduced nightcaps, such as a 180-day limit in Greater Sydney and a proposed similar cap for Melbourne. Additionally, there are stricter fire safety requirements and increased council rates in certain regions.
Is Airbnb still a profitable venture in Australia?
While Airbnb Australia can still be profitable, the landscape has changed. Increased regulations, rising costs, and more competition have narrowed the financial advantage over long-term rentals. Profitability now depends heavily on factors like location, property type, and the host’s ability to navigate new rules and market dynamics.
What insurance considerations should Airbnb hosts be aware of?
Standard homeowner and landlord insurance policies typically don’t cover short-term rentals. Hosts need specialised short-term rental insurance, which has seen rising premiums. Airbnb’s AirCover for Hosts has limitations, so additional coverage is important to protect against potential losses and liabilities
How are different Australian states regulating short-term rentals?
Regulations vary by state. For example, NSW has a 180-day cap for non-hosted rentals in Greater Sydney. Victoria is proposing a similar limit for Melbourne, and Queensland has introduced increased council rates for properties listed as short-term accommodation for more than 60 days annually. Western Australia and South Australia have implemented registration systems and development approval requirements.
What should property investors consider before starting an Airbnb in 2025?
Investors should carefully assess local regulations, calculate true costs, including insurance and compliance requirements, evaluate seasonal demand patterns, and consider the property’s location and type. It’s also important to compare potential returns against long-term rental options and be prepared for more active management compared to traditional tenancies.