Stefan Nikolic: Why Auckland investors should not write off short-term rentals just yet (despite the lockdown)

It comes as no surprise that the short-term rental market is heavily affected during lockdowns, and some investors will be put off by the idea of staying in the market, but that doesn’t mean you should give up on the idea altogether. In fact, lockdowns present a massive opportunity for those investors that are looking to adopt a counter-cyclical investment strategy and take a more long-term approach.

During a lockdown, occupancy rates plummet due to travel restriction, and a lot of investors in the short-term rental market give up hope and either lock in a tenancy agreement, or they start thinking about selling their properties. Both are reactive strategies to today’s problems and don’t take into account the investor’s long-term goals – financial freedom and security. With many properties leaving the short-term rental market due to a lockdown, this presents new investors with an opportunity to jump in at a time when competition is low, and those that stick with short-term rental the opportunity to reap the benefits when the lockdown lifts.

By throwing in the towel, those investors that leave the market are essentially believing that the accommodation industry will not return to normal and that people will not travel when they can. This is obviously not the case as travel is an essential part of life, and the tourism industry was the fastest growing sector in New Zealand before COVID. A lockdown is just a bump in the road towards success, and the market recovers as quickly as it plummets after a lockdown.

We’ve been through a lockdown like this before and now know what happens when we return to normal. People can’t wait to travel! Pent up demand is released all at the same time resulting in the short-term rental market outperforming pre-COVID years for those same months. This effect is exaggerated due to the lower numbers of short-term rentals available on the market.

For example, after the first lockdown in New Zealand, we achieved occupancy and nightly rates similar to those in the high season at a time that is usually the beginning of the low season for our managed short-term rentals. After the current lockdown, I believe the market will recover even faster as people are less cautious than the first time it happened – we’re not dealing with the unknown like we were in March and April 2020.

If you’d like to learn more information about how short-term rental works and find out if this strategy is a good fit for your goals, then please visit our website at www.zodiak.co.nz or get in touch with me directly at [email protected].

This is a guest blog submission from Stefan Nikolic of Zodiak Management. Guest submissions are a way for APIA members to share their views and experiences with each other and do not necessarily reflect the views and position of the APIA. The content of this article is general in nature and not intended as a substitute for specific professional advice on any matters and should not be relied upon for that purpose.