Greater Melbourne short-term rental report 2025
Melbourne is among the top cities globally for Airbnb rentals and the team at MadeComfy have analysed the data on occupancy rates, average revenue and booking volume in different suburbs across the city.
Introduction
Melbourne, Australia's cultural and economic hub, boasts a thriving short-term rental market. The market has grown significantly due to increasing demand from both domestic and international travellers. With its diverse range of attractions, seasonal events, and strong economic performance, Melbourne’s short-term rental sector plays a vital role in the broader hospitality industry. This report provides an in-depth market analysis, including key metrics, regulatory landscape, market trends, and case studies to assess the sector's current and future outlook.
Overview
The Australian short-term rental market was valued at approximately AUD 3.4 billion in 2024 and is projected to reach AUD 6.4 billion by 2030, growing at a compound annual growth rate (CAGR) of 11.5%. As of January 2025, Melbourne's short-term rental market has maintained stable annual revenue at an average of $49.5K per property. The average daily rate (ADR) stands at $315.35, reflecting a 1% year-over-year growth. Occupancy rates now average 56%. The city’s market is concentrated in high-demand areas, including:
- Melbourne CBD: Central location, business-friendly, and free tram zone.
- Southbank: Luxury accommodations, arts precinct, and riverside attractions.
- St Kilda: Beachside living, vibrant nightlife, and easy city access.
- Docklands: Modern high-rises, waterfront dining, and stadium proximity.
- Richmond: Trendy cafes, sporting venues, and excellent public transport.
- South Melbourne: Heritage charm, fresh food markets, and close CBD access.
Seasonal trends strongly influence market performance, with peak periods occurring in summer (December to February) and significant dips in winter (June to August). However, major events such as the Australian Open, Formula 1 Grand Prix, and Melbourne International Film Festival help sustain occupancy rates year-round.
Major events & concerts throughout 2025
Legislation
Melbourne's short-term rental market is governed by a mix of local council restrictions and state-level policies aimed at balancing tourism benefits with housing affordability concerns.
Regulatory Environment
The regulatory framework in Melbourne is evolving, with new policies introduced to manage the impact of short-term rentals on housing availability and neighbourhood stability.
Current Regulations
- Local Council Authority: As of January 1, 2025, owners' corporations (homeowners' associations) can create rules banning short-term rentals in specific residential developments, except for primary residences.
- State Government Levy: A 7.5% levy on short-term rental accommodations applies to stays under 28 consecutive days, with revenue allocated to social and affordable housing programs.
- Rental Duration Limits: Some councils may introduce caps on the number of nights a property can be rented for short-term stays.
Compliance Requirements
- Registration: Property owners may be required to register their short-term rental properties with local councils, depending on specific municipal regulations.
- Safety Standards: Hosts must ensure properties comply with fire safety codes, including functional smoke alarms and emergency exits.
- Insurance Needs: Standard home insurance policies may not cover short-term rentals, making additional coverage necessary.
Upcoming Changes
- Local Council Powers: Starting in 2025, councils can impose additional regulations, including the ability to ban short-term rentals or impose additional fees.
- Enforcement Measures: Regulatory authorities are expected to implement stricter monitoring and compliance mechanisms to ensure adherence to the new policies.
These regulatory measures reflect a broader effort to balance the economic advantages of short-term rentals with the need for long-term housing stability in Melbourne.
Market Data
Melbourne’s short-term rental market exhibits dynamic trends driven by seasonal demand, geographical distribution, and major events. As of January 2025, Melbourne's short-term rental market has maintained stable annual revenue at an average of $49.5K per property. The average daily rate (ADR) stands at $315.35, reflecting a 1% year-over-year growth. Occupancy rates now average 56%.
Occupancy Trends
Occupancy rates fluctuate throughout the year, with peak seasons in summer (December to February) driven by warmer weather and high-profile events like the Australian Open and Formula 1 Grand Prix. Winter months (June to August) experience lower occupancy due to cooler temperatures, but key events such as the Melbourne International Film Festival help mitigate declines.
- Melbourne CBD: 68%, benefiting from business travellers and proximity to corporate hubs.
- Docklands: 67%, leveraging waterfront attractions and event-driven demand.
- Southbank: 63%, home to luxury accommodations and cultural landmarks.
- St Kilda: 61%, popular for its beachside setting and summer tourism.
- Richmond & South Melbourne: 59% and 57%, with steady occupancy supported by sports events and vibrant dining scenes.
Average Daily Rate (ADR) Trends
ADR fluctuates based on seasonality and event-driven spikes. The highest ADRs are observed in December and January, while the lowest rates are typically seen in May and August.
- Southbank: $316.55 – The highest ADR, reflecting the demand for premium stays.
- Docklands: $298.44 – Driven by waterfront views and modern apartments.
- Melbourne CBD: $262.66 – Competitive pricing influenced by corporate and tourist demand.
- St Kilda: $230.18 – More budget-friendly, attracting leisure travellers.
- Richmond: $285.07 – Trendy location with demand for boutique accommodations.
- South Melbourne: $280.73 – Balanced market with steady revenue.
Revenue Performance & Short-Term vs. Long-Term Comparison
Despite declines in occupancy, ADR (Average Daily Rate), and RevPAR (Revenue per Available Room) in the short-term rental market, revenue from short-term rentals remains significantly higher than long-term rentals in most areas. Here's why:
Revenue Comparison (Short-Term vs. Long-Term Rentals)
- Even with lower occupancy and falling ADRs, short-term rentals generate more revenue than long-term leases in most major suburbs.
- The dynamic pricing model of short-term rentals allows revenue maximisation during peak seasons, offsetting the impact of seasonal dips.
Key Suburb Comparisons
Even though occupancy, ADR, and RevPAR have declined, short-term rentals remain more profitable than long-term leases in all Melbourne suburbs analysed. The ability to adjust pricing based on demand and peak seasons allows short-term rentals to maintain revenue superiority over traditional leasing.
Market Insights
- Airbnb dominates the market, comprising 65% of listings, while Vrbo holds 6%, and 29% of properties are cross-listed on both platforms.
- Dynamic pricing strategies are essential for maximising revenue, particularly during low-demand months.
- Event-driven demand remains a key factor in maintaining revenue stability throughout the year.
With Melbourne’s short-term rental market outperforming long-term leasing across most areas, investors and hosts must adopt strategic pricing and marketing tactics to optimise performance.
Market Spotlight: Southbank
The Southbank region is a prime destination for short-term rentals, known for its vibrant city life, luxury apartments, and cultural attractions. With high demand throughout the year, just minutes from Melbourne's CBD, the area has seen an increased ADR trend, particularly in late 2024. Property owners have a great opportunity to maximise their rental yield by listing their properties on short-term rental platforms and capitalising on the demand from tourists and business travellers alike.
Southbank ADRs - Last Quarter 2024 Year-on-Year
Case Study: Event-Driven Market Influence
Major events significantly impact Melbourne’s short-term rental market. For instance, during the Formula 1 Australian Grand Prix (March 2025):
- Occupancy surged to 84.25% in Melbourne CBD.
- ADR spiked from the monthly average of $254 to over $300.
- Revenue per available room (RevPAR) increased by 15%.
Similar effects were observed during the Australian Open (January 2025) and Melbourne International Comedy Festival (April 2025), highlighting the strong event-driven nature of the market.
Conclusion
Melbourne's short-term rental market continues to demonstrate strong potential, driven by seasonal demand, major events, and an evolving regulatory landscape. The market remains resilient despite occasional fluctuations, with high-revenue suburbs such as Docklands, Southbank, and Melbourne CBD maintaining a strong lead over long-term rental options. Key takeaways from the analysis include:
- Seasonal and Event-Driven Growth: Peak occupancy and ADRs coincide with major events like the Australian Open, Formula 1 Grand Prix, and Melbourne International Comedy Festival, reinforcing the importance of event-driven demand.
- Regulatory Adjustments: The introduction of a 7.5% short-term rental levy and local council restrictions may impact profitability, requiring hosts to adapt their strategies to maintain compliance and optimise revenue.
- Market Dynamics: High-end locations such as Southbank and Docklands outperform other areas due to their luxury appeal and waterfront positioning, while budget-conscious travellers continue to favour St Kilda and South Melbourne.
- Short-Term vs. Long-Term Profitability: Despite fluctuations in ADR and occupancy, short-term rentals in key suburbs continue to generate higher annual revenues than long-term leases, making them an attractive investment option.
- Platform Dominance and Pricing Strategies: With Airbnb controlling 65% of the market, hosts must leverage dynamic pricing models and multi-platform listing strategies to sustain demand during off-peak seasons.
Success in Melbourne’s short-term rental market will depend on strategic pricing, compliance with evolving regulations, and capitalising on major events. Hosts and investors must stay agile, leveraging data-driven insights to maintain profitability and secure long-term sustainability in this competitive landscape
Gross rental income per month as a professionally managed short-term rental
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