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Another 7. 5% tax by the Victorian government. This year, Airbnbs are getting charged 7. 5% of their revenue. This is going to have an effect on the market.
But the question is, how big that effect is going to be? This is not the first time large restrictions have come in to disrupt the property market. In this episode, we're going to unpack historic restrictions and how they affected the property market. Help you understand exactly what the tax is, as well as getting to know if this is going to genuinely cause an oversupply and send vacancy rates through the roof. I'm Joma, lead research analyst at InvestorKit, and let's get into it.
So what is the Victorian Airbnb tax? From January 1st, 2025, retail short-term rental owners are charged a 7. 5% tax on the total cost of each booking, including service fees like cleaning fees and GST. But this tax doesn't apply to longer stays over 28 days. The Victorian government said that they are going to be using the revenue generated from this to support social housing and affordable housing development.
Currently in Victoria, there are around 63,000 short-stay accommodation places. For simplicity, I will just call short-stay accommodation Airbnbs. Among those 63,000 Airbnb properties, more than half are in Melbourne. So let's say it's 32,000 properties being Airbnb in Melbourne. With this new tax in place, will there be a lot of short-term rental owners turning their place to long-term rentals and cause a large influx of all these listings in the Melbourne rental market?
Let's try to find some historic data in similar situations. Victoria is the only state that is putting a tax on Airbnb properties, so it's impossible to find any historic data tax-related. But Sydney and Byron could be some good examples to use because these two cities have really strict restrictions on Airbnb properties. Let's look at them one by one. So Greater Sydney put a 180-day cap on Airbnb properties in November 2021, meaning that no Airbnb properties can be booked out for more than 180 days each year.
For really popular suburbs like Sydney City or the Eastern Suburbs, this cap sounds really bad, much worse than the 7. 5% tax. So what happened to the Sydney rental market after this restriction was carried out? Let's have a look at this chart. I'm showing you here the number of listings in Greater Sydney's rental market from 2019 to the end of 2024.
The arrow in the middle points to November 2021 when that 180-day cap came into effect. And do you see any difference before and after the arrow? I don't think I can spot anything. But in comparison, what's really made a difference was when the international border was closed in 2020 to early 2021. We can see a significant spike in both the number of listings in the house market and the unit market.
And then when the international border was reopened, we see this sudden drop in number of listings in both of these two markets as well. One thing that might be worth mentioning is with the blue line, which is the unit number of listings. We see a much more significant increase in the number of listings in units than it was in the house market. It was caused by many reasons, not just the loss of international students and other overseas migrants, but also because of the large amount of apartments that started building in 2017-18 and just finished in 2020 and early 2021. And then how about vacancy rates?
While there is no effect on number of listings, was there any effect on vacancy rates? Let's have a look at this chart I'm about to show. Again, the arrow in the middle shows November 2021 when the cap was carried out. Vacancy rates did increase slightly right after November, but we need to consider that November 2021 was towards the end of the year. And as we can see in any year, November, December and January is always the time or the season where vacancy rates goes up.
And there's no significant change in the end of 2021. So I don't think the 180-day cap had done anything material to Sydney's vacancy rates. So in Sydney, we don't see any difference that the 180-day cap made when it came into effect. Now let's have a look at a much smaller market and see if the cap there had made any difference. Byron Shire has always been troubled by the large amount of short-term rentals in that area because that was causing a severe housing shortage issue locally.
So Byron Shire first introduced a 180-day cap on Airbnb properties in January 2022. And after almost three years, in September 2024, they further decreased that cap to 60 days. That is really strict. So what did these two restrictions do to the local rental supply and vacancy rates? Let's have a look at these two charts.
First chart is about number of listings. In January 2022, when the first time the 180-day cap was introduced, I don't see any difference made to the house market supply or for these listings. There was a slight increase in the unit market, and that could be contributed by this 180-day cap. And then fast forward to September 2024, just two months after the restriction was introduced, we don't see any difference in the house market supply. And we do not see significant difference in the unit market supply either.
So when the 180-day cap restriction was introduced in January 2022, we do see that the vacancy rates increased to a higher level than where it was back in 2021. The 180-day restrictions could be one of the factors that caused this vacancy rate increase, but there could be other causes. For example, in 2022, when life came back to normal from COVID, more and more companies and employers were encouraging their employees to come back to the office instead of working remotely. So while many people were able to work from Byron remotely, they had to move back to their own city. So that could be another reason that caused this increase in vacancy rates.
And as for the newer restriction of the 60-day cap, there is not enough time to draw any conclusion yet. But so far, we were seeing a decrease in vacancy rate at the end of 2024 and an update in the beginning of 2025. We need more data to be able to tell if that new restriction will make further impact on Byron's rental market. So historic data has shown that restrictions on Airbnb properties has minimal impact on property market. If there's any, it'll be on smaller markets and more on the unit markets instead of the house markets.
So let's bring it back to Victoria. The 7. 5% tax. There's two ways we can look at the data. One way is saying that there could be an effect on vacancy rates increasing.
But the other is suggesting maybe there won't be much change. And the key between these two directions is houses and units. The data tells us from markets that had restrictions being put on before, the unit market seemed to be more affected than the house market. But that's not the only variable. Another thing to consider is market size.
Let me wrap it up with two very quick examples. If you're an Airbnb investor or have invested in a market with a lot of Airbnbs, if you have a house in a very large market, the chance of your investment being disrupted is much lower. However, if you've got a unit in an Airbnb location that is a much smaller market, and then the chance of your investment being disrupted would be much higher. If there is anything you're still unsure about, leave a comment below and let's discuss more. My name is Joma, the lead research analyst here at InvestorKit.
I'll see you next time.
