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Short-term rentals in Australia remain profitable in 2025, though margins are tightening due to rising costs and stricter regulations. Australia's short-term rental market continues to show strong demand from domestic and international travelers, with occupancy rates holding steady across major cities like Sydney, Melbourne, and Brisbane.
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Short-term rental rates in Australia have increased by approximately 5% year-over-year, with Sydney averaging $175 per night and Melbourne at $219 per night. Operating costs have risen 8-13% due to inflation and new regulatory fees, including Victoria's 7.5% levy effective January 2025.
| City | Average Nightly Rate | Occupancy Rate | Monthly Earnings (2BR) | Regulatory Changes |
|---|---|---|---|---|
| Sydney | $175 | 56% | $2,759 | Mandatory registration, fire safety compliance |
| Melbourne | $219 | 66% | $3,200 | 7.5% state levy from Jan 2025 |
| Brisbane | $311 | 60% | $4,100 | Permit requirements under review |
| Perth | $185 | 84% | $3,500 | Mandatory registration from Jan 2025 |
How much are short-term rental nightly rates in Australia compared to last year?
Short-term rental nightly rates in Australia have increased by approximately 5% compared to last year.
Sydney leads major cities with median nightly rates around $175 for typical properties, while top-performing listings can command over $450 per night. Melbourne follows with average rates of $219 per night, and Brisbane shows the highest rates at $311 per night.
The rate increases have been steady but moderate, reflecting strong underlying demand from both domestic and international travelers. Perth and Adelaide have also seen similar growth patterns, with rates typically ranging between $150-$200 per night for standard two-bedroom properties.
As of September 2025, the rate growth has stabilized compared to the rapid increases seen in 2023-2024, suggesting the market is reaching a more sustainable pricing equilibrium.
What is the average occupancy rate across major cities like Sydney, Melbourne, and Brisbane right now?
Occupancy rates across Australia's major cities remain robust, with significant variation between markets.
Perth leads with the highest occupancy rate at 84%, followed by Brisbane at 79% and Sydney at 78%. Melbourne shows the lowest occupancy among major cities at 68%, though this still represents healthy demand levels.
As of September 2025, national occupancy averages have held steady compared to 2024 levels. Top-performing properties in Sydney can achieve occupancy rates up to 90%, particularly those with premium locations and professional management.
The strong occupancy rates reflect Australia's continued appeal as a travel destination and the recovery of both domestic and international tourism to pre-pandemic levels.
How do seasonal trends in Australia affect short-term rental bookings this year compared to previous years?
Seasonal patterns in Australia's short-term rental market follow predictable trends that have remained consistent in 2025.
Peak season runs from December through March, coinciding with summer holidays and international tourism peaks. During these months, both occupancy rates and nightly rates increase significantly, with some properties seeing 30-40% higher earnings compared to low season.
Low season occurs from May through July, when cooler weather and fewer holidays result in reduced demand. Occupancy rates typically drop by 15-25% during these months, though experienced hosts adjust pricing strategies to maintain profitability.
The seasonal volatility remains moderate compared to other markets, and successful short-term rental operators have learned to maximize revenue through dynamic pricing and targeted marketing during shoulder seasons.
What are the typical monthly earnings for a two-bedroom Airbnb in Sydney, and how does that compare to long-term renting it out?
A typical two-bedroom Airbnb in Sydney generates approximately $2,759 per month in gross revenue.
| Property Type | Monthly Earnings | Annual Revenue | Management Level |
|---|---|---|---|
| Typical Sydney 2BR Airbnb | $2,759 | $33,108 | Active management required |
| Top 10% Sydney 2BR Airbnb | $7,150+ | $85,800+ | Professional management |
| Long-term rental Sydney 2BR | $2,300-$2,500 | $27,600-$30,000 | Minimal management |
| Average Sydney Airbnb | $3,583 | $43,000 | Moderate management |
Well-managed short-term rentals typically earn 30-60% more annually than standard long-term leases, but require significantly more time, effort, and ongoing management compared to traditional rental arrangements.
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How much have operating costs like cleaning, utilities, and management fees increased in the past 12 months?
Operating costs for short-term rentals in Australia have increased by 8-13% over the past 12 months.
Cleaning fees have risen most significantly, driven by wage inflation and increased demand for professional cleaning services. Many operators now pay $80-120 per turnover for a two-bedroom property, compared to $70-100 in 2024.
Utility costs have also increased, particularly electricity and gas, as short-term rental properties typically consume more energy due to higher usage patterns and guest comfort expectations. Management fees for professional services have risen to reflect increased labor costs.
Victoria's new 7.5% levy on short-term rental income, effective January 2025, represents an additional significant cost increase for operators in that state. It's something we develop in our Australia property pack.
What are the current local council or state regulations on short-term rentals in Australia, and have they changed recently?
Australian short-term rental regulations have become significantly stricter in 2025, with major changes across multiple states.
Victoria introduced a 7.5% levy on short-term rental income from January 2025, while also empowering local councils to cap or ban short-term rentals in their areas. New South Wales now requires compulsory registration and fire safety compliance for all short-term rentals.
Byron Shire in NSW has implemented one of the strictest rules, limiting short-term rentals to just 60 nights annually, down from the previous 180-night limit. Western Australia introduced mandatory registration requirements for all short-term rentals starting January 2025.
Brisbane and other major cities are currently reviewing permit requirements, with many councils moving toward stricter oversight and potential caps on the number of short-term rental properties allowed in residential areas.
How do short-term rental tax obligations differ from long-term rental properties in Australia this year?
Short-term rental tax obligations in Australia are more complex and potentially more expensive than long-term rental properties in 2025.
Short-term rental profits may be subject to GST (Goods and Services Tax) if you operate multiple properties or generate significant income, treating it as a business activity. Long-term rental income is typically taxed as investment income without GST obligations.
Capital gains tax (CGT) exemptions can be impacted when renting out all or part of your primary residence short-term, according to Australian Taxation Office rules. Long-term rental properties generally qualify for broader expense deductions and are often taxed at more favorable rates.
The new Victoria state levy adds an additional 7.5% tax burden specifically on short-term rental income, creating a significant disadvantage compared to long-term rental taxation in that state.
What impact are rising interest rates and higher mortgages having on the profitability of short-term rentals?
Rising interest rates over the past year have squeezed profit margins for short-term rental operators who rely on mortgage financing.
Higher loan repayments have increased the break-even point for many properties, requiring higher occupancy rates or nightly prices to maintain profitability. Some operators have seen their monthly mortgage payments increase by $300-500, directly impacting net returns.
However, forecasted rate cuts in the second half of 2025 are expected to provide relief, with property investor demand and short-term rental profitability anticipated to rebound. The Reserve Bank of Australia's monetary policy outlook suggests a more favorable environment for leveraged property investments.
Operators with existing fixed-rate mortgages have been better positioned to weather the current rate environment, while those on variable rates have faced immediate margin pressure.
We did some research and made this infographic to help you quickly compare rental yields of the major cities in Australia versus those in neighboring countries. It provides a clear view of how this country positions itself as a real estate investment destination, which might interest you if you're planning to invest there.
How do traveler demand and international tourist arrivals in Australia this year compare with 2023 levels?
International tourist arrivals to Australia in 2025 have fully recovered and are matching or exceeding 2023 levels.
Bookings for short-term accommodation are up 18% since 2022, indicating strong growth momentum that has continued through 2025. Both domestic and international travel demand have rebounded to pre-pandemic levels, with some markets showing even stronger performance.
The tourism recovery has been particularly strong in Queensland and New South Wales, where major tourist destinations continue to attract high visitor numbers. Business travel has also returned to normal levels, supporting demand in commercial centers like Sydney and Melbourne.
One- and two-bedroom properties continue to dominate booking volume, reflecting the preferences of couples and small families who make up the majority of short-term rental guests.
What percentage of short-term rental owners are currently experiencing a decline in bookings or revenue?
Approximately 35-45% of short-term rental owners in Australia report experiencing a decline in bookings or revenue in 2025 compared to peak pandemic travel years.
This decline is primarily attributed to increased competition rather than reduced demand, as the number of short-term rental listings has grown by over 26% in the last year. Many smaller operators struggle to compete with professional hosts who have better marketing, pricing strategies, and guest services.
The market has become increasingly professionalised, with experienced operators maintaining strong performance while newer or less engaged hosts face revenue challenges. Properties in oversaturated markets or those lacking professional management are most likely to experience booking declines.
However, well-positioned properties with competitive pricing and quality amenities continue to perform strongly, suggesting that success depends more on execution than market conditions.
How competitive is the market in major tourist areas, and how many active listings are there compared to last year?
The Australian short-term rental market has become significantly more competitive, with active listings growing by over 26% compared to last year.
Major tourist areas like the Gold Coast, Byron Bay, and Airlie Beach show the highest concentration of listings, with some markets approaching saturation levels. Professional hosts now dominate these areas, using sophisticated pricing tools and marketing strategies that make it difficult for casual operators to compete.
Sydney and Melbourne have seen particularly large increases in listing numbers, though demand growth has largely kept pace with supply. Smaller tourist towns and regional areas are experiencing the most dramatic increases in competition as new operators enter the market.
The increased competition has led to a professionalization of the industry, with many successful operators now managing multiple properties and treating short-term rentals as full-time businesses rather than passive investments. It's something we develop in our Australia property pack.
What are the realistic net profit margins after expenses for an investor running a short-term rental in Australia in 2025?
Realistic net profit margins for short-term rentals in Australia range from 15-35% after all expenses, though margins are narrowing due to increased costs and regulatory levies.
| Expense Category | Typical Monthly Cost (2BR) | Percentage of Revenue |
|---|---|---|
| Cleaning and maintenance | $400-600 | 12-18% |
| Utilities and internet | $200-350 | 6-10% |
| Management fees | $300-500 | 8-15% |
| Insurance and licensing | $150-250 | 4-7% |
| Marketing and platform fees | $200-400 | 6-12% |
| State levies (Victoria) | $200-350 | 7.5% |
| Total Operating Expenses | $1,450-2,450 | 45-65% |
Properties in premium locations with professional management typically achieve margins at the higher end of this range, while those in competitive markets or with higher cost structures may see margins closer to 15%.
The introduction of new state levies and increased operating costs means that profit margins are under pressure compared to previous years, making careful financial planning and professional management more important than ever. It's something we develop in our Australia property pack.
Conclusion
This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.
Short-term rentals in Australia remain profitable in 2025, but the landscape has become more challenging due to increased competition, rising operating costs, and stricter regulations.
Success now requires professional management, strategic pricing, and careful attention to regulatory compliance, making it more suitable for serious investors rather than passive income seekers.
Sources
- Beyond Pricing - Top Airbnb Markets in Australia
- Hometime - Long-term vs Short-term Rentals Comparison
- AirROI - Sydney Market Report
- Labode Accommodation - 2025 STR Regulations NSW VIC
- EM Lawyers - Victoria Short Stay Levy
- Airbtics - Sydney Airbnb Revenue Analysis
- Right Key BnB - Airbnb Income Analysis
- Right Key BnB - Australia Occupancy Rates
- MadeComfy - 2025 Property Market Navigation
- Investax - Converting to Short-term Rental Guide