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Is #Airbnb BAD? Is Airbnb Increasing House Prices?

More and more we are seeing news articles blaming Airbnb for increasing house prices, and more and more we are seeing local people complaining that Airbnb is increasing houses prices and driving up rent to unaffordable levels. Some examples here, here, here & here.

In this article I’ll cover the situation where I am in Greece, what changes have happened, the causes of these changes, if the changes are negative, the government response and then answer thee question, is Airbnb bad?


The Situation & The Changes

I live in area close to Thessaloniki & Halkidiki in Greece. It’s a super popular tourist destination year round and especially so in the summer. Six years ago you could find a one bedroom apartment (to live in) with a rent of 250 Euros a month. Now the prices are 450 Euro a month.

And it’s a similar story in Thessaloniki. With a minimum wage of around 600 Euros a month, local people (renters) are complaining that the housing is becoming unaffordable.

Is attracting more visitors bad for the economy of Thessaloniki as a whole?

But is Airbnb the problem?

I guess the first question to ask is, does Airbnb attract people to the area? Are people coming to Thessaloniki and Halkidiki because of Airbnb?

Of course the answer is no. People are coming to Thessaloniki and Halkidiki because they want to soak up the lifestyle of the area.

If we imagine Airbnb didn’t exist, where would these visitors be staying?

Logically people will stay in hotels (large and small) and in local guest houses. If Airbnb stopped renting in the area and all these visitors had to stay in hotels in guest houses, you can imagine two things happening.

One, the prices of the hotel rooms would balloon massively.

Two, the number of people coming to the area would decline massively, not just because of the cost of hotel rooms but because of the lack of available hotel rooms. Indirectly you can say increasing accommodation does attract people, but it is not the primary motivation.

In summary.

Increasing the amount of accommodation available by renting out private accommodation, be it with Airbnb, Booking or other platforms, the net effect is more visitors/tourists to an area because prices are lower and the availability is larger.

And this moves us onto the broader effects of increasing visitors.

Is it bad for the economy? Is it bad that more people visit Thessaloniki and Halkidiki?

Tourism is arguably one of the most profitable industries on the planet. People come and visit you (your area) and they give you all of their spending money for the entire time they are there, and during their two week holiday, they spend much more money than they normally would in two weeks back at home. Then they leave.

Every company in the area benefits from this influx of cash. Supermarkets, car rental companies, garages servicing rental cars, tool suppliers, cleaning companies, airport staff, home furnishing stores the list goes on and on.

And then there is the knock on effect of the increased demand, supermarkets can stock a greater selection of products, smaller niche producers and retailers become viable, the destinations from the airport increase making it easier for locals to travel around the world and of course there are more jobs which increase wages.

Tourism has always been seen as a massively important industry, an industry that increases the wealth of an area.

But…

Now it seems we can have too much tourism. If tourist accommodation supply increases in quantity, quality and value, an area can start to realise it’s previously untapped potential but this leads to increased prices for accommodation in general.

Where Does This Leave Us?

The driver for tourism is the location, to realise the potential of the location we need tourist accommodation and if housing does not keep up with demand, we get higher prices. Higher prices which are felt mostly by those living in the area (because paying a higher price for two weeks of accommodation puts less of a dent in the wallet than paying higher prices for 52 weeks).

Net-Net

Is an area in a better position when tourism potential is being realised?

Does having an area which is more prosperous (due to all the multiplier effects that go with having more people living an area) lead to a worse situation?

More jobs, especially in an area with high unemployment (like Greece) cannot be a bad thing. The only downside of having more people in an area is it puts more pressure on accommodation. Things have the potential to become cheaper due to economies of scale. For example a construction company having enough work to utilise the entire work day of their employees or a supermarket checkout serving more people or transport companies operating vehicle with better utilisation. But if there is a shortage of plumbers for example, plumbing prices can go up but so do plumber wages.

The Response

The answer from the Greek government to rising accommodation costs is to start “cracking down” or people renting their property. For example limiting the amount of rented properties in an area or specifying what spaces can be used for accommodation and which can’t.

I think governments of Greece from the 50s and 60s would be incredulous that a government in the 2020s would be actively trying to reduce tourism, especially when you consider the state of the Greek economy versus the rest of Europe.

The problem has been identified (lack of property) but the government, for some reason, has chosen not to address it directly. Instead their goal is to reduce tourism despite the massive economic benefit it brings to the country.

Coming Back To The Original Question

Given all this, is Airbnb increasing house prices? Is Airbnb the bogey man?

Yes Airbnb is partly responsible. It is responsible along with airports, travel agents, great beaches, hot weather, crystal clear sea and other short term accommodation rental websites.

Yes increasing house prices and rent prices are a problem (a problem that is easily solved in a way that also benefits the economy) but looking at the big picture, at all of the economic benefits, directly & indirectly, that come from a growing tourism industry, the pluses of more tourism should far outweigh the negatives.

The property market will adapt (if it is allowed to), it may take longer than is ideal, especially when tourism growth happens so fast, but the invisible hand will work it’s magic.

Perhaps it would be helpful to look at it from a different perspective, to look at the other extreme. If Greece had less tourism, would people be better off?

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This page was last modified Oct 18, 2024 @ 2:01 pm

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