Liverpool may be about to see a slowdown in the boom in Airbnb and short term let apartments in the city centre as investment dynamics change, one local expert says. Tony McDonough reports

A huge growth in Airbnb and short term let apartments in Liverpool city centre may have peaked with a slowdown in growth imminent.

That is the view of Alan Bevan, managing director of Liverpool property agency City Residential. In his quarterly analysis of the city’s residential sector Alan claims the flight from long-term lets to short stay could go into reverse.

Since the end of the pandemic Liverpool city region’s visitor economy has bounced back strongly. The sector is now worth more than £5bn with visitor numbers for 2022, the most recent figures available, hitting 56m.

Figures for just Liverpool for 2022 showed 31.5m visitors in 2022 offering an economic boost of almost £3.6bn. In March this year LBN revealed hotel bookings had hit their highest levels for six years in the first few weeks of 2024.

Helped by events such as Eurovision, which put Liverpool in the global shop window in 2023, demand for short-let accommodation has continued to rise in the city hence the growth of the Airbnb market.

“Whilst COVID massively impacted this (tourism) industry during 2021/2022 the bounce back from these tough times has been remarkable and is testament to the city’s status as one of the most popular short break destinations,” said Alan.

He said this demand had encouraged many landlords who would have otherwise let their apartments on a normal AST (private rented sector) tenancy to move across to the short stay sector.

“They have also been encouraged to do so with the promise or expectation of much higher levels of return in comparison to letting to a normal tenant on a six or 12-month timescale,” he added.

“With yields in the private rented sector averaging around 6% to 9% many landlords were attracted to the higher yields (closer to 15 to 20%) being reported in the short term/Airbnb market and subsequently moved their properties across once their existing tenants moved out.

“While these yields were available to some landlords it became evident quite quickly that to earn these higher levels of return, they either had to employ a short term letting specialist (often paying substantially higher management costs, cleaning costs etc) or try and manage themselves.

“Whilst the former at least offers a ‘hands off’ management style, the self-management suddenly presented the landlords with all of the ‘hands on’ issues of short term lettings (late arrivals, anti- social behaviour, damaged apartments etc).”

But it is just the hassle of the extra management responsibilities that may cool the market, explained Alan. Demand for long-let apartments has also soared in the city, leading to a “substantial” increase in rents.

He added: “This has resulted in a substantial increase in rents which has narrowed the gap between the returns in the private rented sector and that in the short term sector. 

“We are now seeing examples of apartments where the net return from short term letting is comparable with the best return from the private rented sector making landlords question their strategy.

“Indeed over the last six to12 months we have seen an acceleration of landlords returning from the short term letting market to the AST/private letting market, reversing the trend that had boomed during the last few years.”

As well as encouraging many landlords to migrate from the PRS sector in favour of short term lets the demand for Airbnb style accommodation has also delivered a boom in short term specialist operators.

Many of these operators such as Stay, Premier, Ustay and Happy Days have grown quickly, filling the demand from tourists and visitors to the city.

“Speaking to many of these operators in the city over the last few weeks there is no doubt that they continue to perform strongly and demand is still strong despite the huge increase in supply we have witnessed over the last few years,” Alan said. 

“While we are questioning whether we have hit peak Airbnb for individual landlords/apartment owners, we have no doubt that the future looks bright for the specialist operators, especially those that run a focused and professional organisation.”

Finally, Alan also warned whichever Government is in office by the end of the year, there is a “growing belief” that the Airbnb/short term lettings market is likely to face a regulatory clampdown.