With governments cracking down, short-term rentals are rarely a path to long-term wealth. (Source: Getty)
In the past decade, property investors have begun putting more attention on the high yields that can be achieved with short-term rentals like Airbnb. However, there are ever-increasing moves by governments around the country to limit the amount of time short-term rentals can be leased along with other regulations.
The South Australian government is the latest state to start looking at ways of managing short-stay accommodation in a bid to ease the housing crisis. With more regulation likely, are property investors better off persisting with the short-term rental model or sticking with the traditional approach of leasing the property long-term?
While both models have their place, they serve very different goals for investors and come with different risks and rewards.
RELATED
Short-term rentals remain an enticing option for investors who want to combine both lifestyle and a side income. Properties listed on platforms like Airbnb or Stayz, especially holiday homes near the coast or city apartments, offer the flexibility to enjoy the property yourself while letting guests cover a portion of the mortgage.
You might own a beachfront unit you can escape to on weekends, while generating income from bookings the rest of the time. That dual-purpose model can be especially attractive to families, professionals, or retirees who want to blend personal enjoyment with property returns.
During peak holiday seasons, a well-positioned short-term rental can earn far more in nightly income than a long-term lease would deliver. For flexible owners willing to ride the ups and downs, this can be a useful way to offset holding costs or pay down debt faster.
However, short-term rentals are rarely a path to long-term wealth in isolation. Cleaning and furnishing costs can quickly eat into returns. Income is inconsistent. And, perhaps most significantly, regulation is tightening.
MORE: ATO ‘tightening the rules’ as holiday home owners on notice over $20,000 tax claim
Many state and local governments have already introduced caps on the number of days a property can be rented out short-term, while others are levying extra taxes or licensing fees to disincentivise owners from taking properties out of the long-term rental pool.
Story continues
If you’re relying on consistent income or hoping to build a multi-property portfolio, these variables can turn short-term rentals into more of a lifestyle luxury than a serious investment strategy.
In contrast, long-term rentals offer the kind of predictability and scalability that most investors need to build wealth. With vacancy rates at record lows and rental demand surging across capital cities and key regional hubs, long-term leases provide steady income and strong tenant demand.
A fixed-term lease brings reliable cash flow, which is critical for managing holding costs, especially in an environment where interest rates remain elevated. Without the need for constant tenant turnover, furniture packages, or cleaning services, long-term rentals also tend to come with lower maintenance and management costs.
More importantly, long-term properties allow investors to plan with greater certainty. When you’re building a portfolio, that stability becomes a strategic advantage. You can assess your borrowing power, calculate rental yields, and make decisions with fewer unknowns. It’s this structure and consistency that allow serious investors to acquire multiple assets over time, using equity and rental income to fund the next move.
Abdullah Nouh specialises in investment opportunities across residential and commercial real estate. (Source: Supplied)
The broader economic and policy environment in 2025 is also shaping the short-term vs long-term debate.
High interest rates mean borrowing costs are still a key concern for investors. In this climate, a steady and predictable income is more valuable than ever. Long-term leases align better with managing monthly cash flow and maintaining serviceability.
On the other hand, tourism has bounced back strongly, with both domestic and international travel returning to pre-pandemic levels. That’s fuelling demand in short-term rental markets, particularly in popular tourist destinations where supply remains tight.
However, these gains are increasingly being reduced by government intervention. Regulatory pressure continues to mount, especially in major cities and areas grappling with housing shortages.
Local councils are introducing tighter controls, and state governments are offering incentives to convert short-term rentals back into long-term housing stock. That means the short-term model now carries more legal and compliance risk than in previous years.
Ultimately, the choice between short-term and long-term rentals comes down to your personal objectives. If your goal is lifestyle first, with some income to help cover costs, a short-term rental may serve you well. If your goal is long-term wealth creation, then long-term rentals remain the better choice. In 2025, the better question isn’t which model is better overall, it’s which strategy best supports your goals.
Property is ultimately a vehicle for freedom, but how you get there depends on your roadmap.
Abdullah Nouh is the Founder of Mecca Property Group (MPG), a buyers’ advisory specialising in investment opportunities across residential and commercial real estate. Over the past few years, his team has acquired more than $300 million worth of assets for over 250 clients nationwide. Visit meccapropertygroup.com.au