Disclaimer
I am not an expert on real estate and this is not intended to be used as conclusive investment information but instead for discussion purposes.
Note:
I have not included the full code to keep this focused on analysis.
Problem:
picking out the right neighbourhood and pricing for max revenue.
Assumption
With the transparency of Airbnb, the near perfect info it provides, the amount of time its been available (since 2008 or 10 years), and its peak of host registrations in 2015 (graph below), I believe listings have corrected with market demand.
TLDR:
Waterfront Communities, Niagara, Annex, Bay Street Corridor, Trinity Bellwoods, Kensington-Chinatown are neighbourhoods in the top 13 most listed neighbourhoods with listings price above the average, and would be attractive neighbourhoods to consider for Airbnb. The hotter months of June and September, predictably have the best price. Sunday should be treated like a weekday. Not all holidays are priced higher than the normal days in its month. Canada Day, Civic Holiday, and Good Friday will be able to fetch higher prices. Christmas and New Years are almost the same price as regular December days. You will want to price lower during Family Day, Victoria Day, and Thanksgiving.
Intro
With the rise of Airbnb, people have found it attractive to Airbnb their home or purchase one to do so.
As a person who lives in Toronto and is curious about its real estate, I have analyzed Toronto Airbnb data from June 2017 to 2018 to find attractive neighbourhoods and pricing.
For people looking to purchase a primary home or investment home in a neighbourhood that is high value, I believe this can be useful. The reason is people who stay in Airbnbs usually choose neighbourhoods based on: transportation, nearby amenities (restaurants, grocery stores, gyms, etc), tourist attractions, nightlife, safety, and etc. These often have a relationship on value.
Home Types?
Based on the assumption of market correction, entire homes have most market demand. To contrast this, in a separate analysis, I found New York’s listings of entire homes were 48%. In Toronto, there is also significant demand for private rooms at 36%.
You can see that entire homes have higher average prices no matter the home type.
In Toronto, apartments and condos can be interchangeable terms. You can see that that this is by far the most popular listing, with houses coming in second.
Neighbourhoods for Max Revenue
To get max revenue, I limited my analysis to ‘entire homes’. Below are the the top 25 listed neighbourhoods:
1) Waterfront Communities – The Island
2) Niagara
3) The Annex
4) Little Portugal (also very close to popular Liberty Village)
5) Bay Street Corridor
All top 25 neighbourhoods can be seen below.
Blue = entire home
Red = private room
Purple = shared room
Below, it can clearly be seen that listings are most popular in downtown, mid-town, York University, Scarborough, and a few by the airport.
You can see the differences in areas and types of listings. In the east downtown, there is a disproportionate amount of entire homes, while the west downtown sees more private rooms, and midtown has more shared rooms (perhaps with its increase of houses).
Below, you can see see the average prices of each of the top 25 most listed neighbourhoods and average price overall. You can see neighbourhoods that have higher listings than its peers not always having a higher average price.
The average price overall is $150.63
You may want to know which neighbourhoods they may be able to charge above the norm if they were to provide a higher quality home. Below is a box plot where you can see the frequency of listings that fall outside the norm of its respective neighbourhood.
You can visibly see that Waterfront Communities has the highest frequency of listings outside the neighbourhood’s normal price. Then it would be Niagara and Church-Yonge Corridor. Annex, Bay Street Corridor, Moss Park, Trinity-Bellwoods, The Beaches, and Cabbagetown are notable mentions.
Neighbourhood for Max Revenue Takeaway
Perhaps, people can decide on where to invest with the criteria of the top half of the 25 most popular neighbourhoods where the price is above the average
It is important to keep caution of the last 5 listings. Starting with High Park South, 3 of them have higher than average prices, which can be swayed by outliers.
Using the guideline of the top half of the 25 most listed neighbourhoods, and therefore the top 13 most listed neighbourhoods, and prices that are higher than the average the nieghbourhoods (with average prices in brackets), the neighbourhoods that should be considered for investment are:
1) Waterfront Communities ($177.87)
2) Niagara ($161.37)
3) Annex ($174.63)
4) Bay Street Corridor ($168.53)
5) Trinity Bellwoods ($181.01)
6) Kensington-Chinatown ($152.57)
Pricing for Max Revenue
Lets see if there is seasonality to take into account for pricing.
The highest average prices are between June and September.
This is perhaps because of the warmer summer months since tourists may be skittish of even Canada’s fall and spring. It is also notable that the popular holiday of Canada Day and very popular tourist events, the Caribbean Carnival and Drake’s OVO Fest taking place during these months as well.
Predictably, Friday and Saturday have the highest prices. What I did not expect was Sunday having a large drop off.
Lets take a closer look at the holidays.
Lets view the holidays in order of most listings.
What I was surprised about was that Canada Day, a popular holiday, and arguable would be lucrative, had the lowest amount of listings.
Moreover, Thanksgiving had the highest amount of listings, which occurs in October. However, there was a big price drop from September to October for average price.
However, we now see that Canada Day has the highest average price. Perhaps, some hosts are delisting their home to celebrate in the city. While the increase of tourists to celebrate Canada’s birthday is having a dual effect, and maximizing prices.
Civic Holiday, which has Caribbean Carnival and Drake’s OVO Fest has the second highest average price. Being near the tail end of summer may be a factor too.
Thanksgiving, which saw the most amount of listings for holidays, has the lowest average price. Perhaps, people are going to the suburbs to see their family and listing their homes. With perhaps summer already ending by the time its October, and listings being at its highest, this drives prices to its lowest, from a holidays perspective.
So, are prices always higher when its the holidays? Not necessarily. Below is a chart with Blue representing the holidays and Red for normal days.
In February, May, and October, prices are lower. December sees very little difference.
Some months did not have holidays, like April and June.
Pricing Takeaway
To get max revenue, price higher during June to September. Make sure to price Sunday like a weekday. Take advantage of Canada Day, Civic Holiday, Christmas, New Years, and Good Friday. Don’t overprice during Family Day, Victoria Day, and Thanksgiving.
Thank You for Reading
I hope you found it interesting. If you’re a Torontonian, a person looking to host an Airbnb in Toronto, or a tourist, I hope you found this useful.