Melbourne is one of Australia’s busiest short-term rental markets, known for its steady streams of visitors year-round. If you are a homeowner considering short-term rentals as an income source in or around Melbourne, you need to understand the market trends, pricing and regulations to make the most of your investment. In this guide to Melbourne’s short-term rental market, I discuss all you need to know, from profitability and key locations to rental laws and tips for maximising rental revenue.
Is short-term renting in Melbourne profitable?
Investing in Melbourne’s short-term rental market can be profitable, but success depends on location, property type, and timing.
Average nightly rates by area
As you would expect, the rates vary depending on where the property is located. Melbourne’s CBD and nearby areas like Southbank and Carlton attract $120 to $250 per night. Properties near key attractions like MCG and St Kilda also command premium rates. On the other hand, rental properties in the outer suburbs offer more affordable rates.
Impact on major events
During major events, when thousands of visitors flock to Melbourne, the demand for short-term rentals is through the roof. The city receives many visitors during the Australian Open and the Formula 1 Australian Grand Prix. This surge in housing demands sees property owners adjust nightly rates by up to 50%.
Occupancy trends
Over the years, Melbourne’s short-term rental market has shown resilience. Despite the rising number of properties, demand is ever-increasing. Quality properties, especially those in high-demand areas, benefit the most.
Insights about the short-term rental market in Melbourne
In Melbourne, just like in any major city in Australia, certain property types and amenities have proven particularly beneficial. Here is what every homeowner should know:
Property types
Two-bedroom homes are among the most common listings in Melbourne. These accommodation options balance space and affordability and appeal to small families, business travellers, and couples.
Another common option is renting an entire home. Some guests prefer booking a whole home for privacy and convenience. This is popular among large families who want to maintain camaraderie while travelling.
Essential amenities
The furnished rental market in Melbourne often features key amenities. Most of these properties offer personalised amenities based on the guests they expect for their stay. For instance, it is possible to tailor a room for couples, families, and singles by personalising the offerings and key amenities.
Understanding short-term rental laws & restrictions
The recent changes in short-term rental regulations in Melbourne have introduced new taxes and restrictions that impact both new and existing hosts. Whether you are new to the market or a regular, you need to have these updates at your fingertips.
One recent change with significant cost consideration is the 7.5% short-stay levy, which applies to all bookings made through platforms like Airbnb. This tax, implemented by the State Revenue Office, addresses housing affordability concerns.
If you are operating a short-term rental for less than 90 consecutive days, you are not required to have a permit. However, the Melbourne City Council allows owners’ corporations (body corporations) to set rules. This means that certain apartment buildings may ban or limit short-stay accommodation.
From a tax perspective, rental income must be declared to the ATO, and GST applies to earnings over $75,000 annually. Similarly, failure to comply with owners’ corporation rules can lead to fines of up to $1,100. Working with a short-stay property management can help minimise these risks.
Who do you need to sign up with for short-term rentals?
When entering the Melbourne property investment scene, there are several platforms you can choose to list or manage your property. Popular options like Airbnb, Stayz, and Booking.com offer strong visibility, but each has pros and cons.
Airbnb provides a large user base and flexible pricing, but high competition and guest expectations require active management. Stayz appeals to family travellers, thanks to its longer stays with lower turnover, while Booking.com focuses on hotels and professional listings, which often attract business travellers.
However, if you want a hands-off approach, short-term rental management services like L’Abode handle everything.
Costs & expenses: what to budget for
Before you list your short-term rental, take some time to check the finances. While rental revenue can be good, expenses will often impact profitability. You always want to double-check your budget and see if the expenses and income make sense. Here is a breakdown of the key cost areas:
| Category | Expense Type |
|
1. Initial setup & furnishing
|
Furniture & décor |
| Appliances & electronics | |
| Basic supplies (linens, kitchenware) | |
| Photography & listing fees | |
|
2. Operating expenses
|
Utilities (electricity, water, Internet, gas) |
| Cleaning & laundry services | |
| Maintenance & repairs | |
| Short-term rental insurance | |
|
3. Taxes & Government Fees
|
Short-stay levy (Victoria) |
| Income tax (ATO) | |
| Council rates & body corporate fees | |
|
4. Marketing & Guest Experience
|
Smart locks & security |
| Subscription services (Netflix, Wi-Fi) | |
| Advertising & promotion |
Alternative strategies if short-term rental doesn’t work for you
Not every property thrives in the short-term rental market. If occupancy rates are low or operational costs outweigh profits, you may want to consider these alternative strategies to generate reasonable property income:
Mid-term letting
This option is ideal for business travellers, students, or professionals on temporary assignments. Mid-term rentals (typically 1 to 6 months) balance flexibility and stability. They require less turnover maintenance than short-term stays but allow owners to adjust pricing seasonally.
Long-term letting
Unlike mid-term letting, this one is ideal for homeowners seeking consistent rental revenue. The lease term (6+ months) provides stable income with fewer management demands.
Flexi-letting
This hybrid model lets you switch between short-term, mid-term, and long-term letting. It is best for investors who want to maximise rental earnings while adapting to seasonal trends.
Should you do self-management or choose property management?
If you were to manage a short-term rental yourself, you would need to handle everything, from guest communication to cleaning and pricing. This option gives you complete control over bookings and expenses but is time-consuming. Staying on top of the day-to-day management chores can be overwhelming if you have multiple properties or a full-time job.
On the other hand, a short-stay property management service takes care of all, some or most management duties. You can outsource the most technical aspects, like marketing your listing, or the more routine chores, like coordinating cleaners and handling guest inquiries.
Regardless of your choice, always pick a professional management body to streamline these operations.
L’Abode Airbnb Management in Melbourne offers a complete property management solution if you want income without the hassle. This allows you to enjoy passive earnings while professionals handle the details.