The ‘Air BnB’ Effect?
In years past, Dundee is unlikely to have been very high on a holiday goers list of destinations, with most opting for the more metropolitan draw of Edinburgh or Glasgow. Our limited hotels and B and B’s have historically been aimed at, and only partially filled, by long stay workers rather than those coming to visit the city attractions. However, with hotel after hotel appearing across the city in recent years, heads of the leisure industry are recognising a shift in attitude towards Dundee, with most giving credit to the recent opening of the V and A.
Visitor numbers to the city have been rising since the announcement of our regeneration plan, with overnight visitor figures up 10% in 2018 from the previous year, and further increases predicted in 2019. Whilst this influx of brand name hotels and tourists has spelled good news for our commercial property market, there has also been a less evident benefit on our local residential property market – thanks to the likes of the somewhat controversial ‘Air B n B’ platform.
Most will be well aware of the ‘Air BnB’ model whereby residential properties are available to rent on a night by night basis, with very little hassle. With the ease by which a regular property can be transformed into a ‘B and B’, an increasing number of people are taking advantage of this new scheme for additional income. Data from the Dundee Evening Telegraph has shown a 400% increase in “Air BnB” listings in under three years, with bookings inevitably peaking in September 2018 during the V and A opening.
Whilst individuals benefit from the regular income of renting out their property through this platform, they may also find that the once stagnant market value of their property may also be on the rise. City Centre flats have suffered more than most during the economic cycles of the past 20 years. At the peak of the market, investors and owner occupiers alike were fighting for city centre property, with many regularly selling in excess of £20,000 over their asking price. Fast forward a few years to the slowdown of the recession and these same properties were failing to achieve their asking price, and in a number of cases were falling £10,000-30,000 short. Whilst other properties outside the centre began to recover following the crash, the values of city centre flats began to drop further.
Fast forward again to the last 2-3 years and we are starting to see an upwards trend in both Home Report values and agreed sales prices for city centre properties. Discussions with local and national estate agents and solicitors have uncovered that almost 7 in 10 centrally located flats up for sale have attracted interest from those with intentions to let out as an ‘Air BnB’ (or similar). Most recently, a small-scale development of 8 newly converted flats in the centre sold out within weeks, and more than 50% were to this type of purchaser. On the back of this successful development, we at Graham + Sibbald have received a number of enquiries from investors and alike seeking similar opportunities in the City. There has been a fall in traditional buy-to-let investors in recent years following legislative tax changes in the system, however, we are seeing positive overall growth for City Centre flats for the first time in years. It is speculation at this stage, and open to debate, but many believe that credit for part of this growth must be given to the rising popularity of holiday letting platforms such as ‘Air BnB’.
Many are sceptical as to the benefits of ‘Air BnB’ and believe they may be detracting from first time buyers etc. reaching the market, as has been seen in areas such as Edinburgh/Glasgow. However, in Dundee the property type they are attracting are those which have previously fallen into the hands of buy-to-let landlords, many of which fall into disrepair. ‘Air BnB’s’, by their publicised nature, require to be kept in good condition and so the quality of our housing stock (albeit on a small scale), may improve. ‘Air BnB’ is at an early stage, and with impending restrictions on their use on the horizon the benefit enjoyed may be short-lived. However, for the time being it is worth considering that this new age use of our City Centre flats may be having a positive impact on our residential property market.
At Graham + Sibbald we are an all-encompassing property service and can provide advice and valuations within all sectors of the property market. If you would like to discuss any of the content in this report, or any unrelated property matter then our Dundee office can be contacted on 01382 200064, and a full list of local offices found on our website.