Short-Term vs. Long-Term Rentals in Kiama: Which Option Suits You Best?

Understanding the Kiama Rental Landscape

With its stunning coastline, rolling green hills, and postcard-worthy lighthouse, Kiama has long been a magnet for tourists and sea-change seekers alike. What was once a quaint fishing village has transformed into one of the Illawarra's most desirable towns, attracting holidaymakers and long-term renters eager to soak up its relaxed lifestyle.

This dual appeal has created an interesting tension for property owners: Should you go short-term or long-term with your rental?

The answer isn't simple. The best rental strategy depends on your goals, property type, risk tolerance, and lifestyle. Both options have strong potential in Kiama but come with very different challenges, commitments, and returns.

With a growing population, surging tourist numbers, and tighter property availability, Kiama's market is hotter than ever, and investors must choose wisely. This guide will help you compare the two rental strategies and decide which fits your property and financial goals.

What Are Short-Term Rentals?

Short-term rentals, often known as holiday lets or Airbnb-style accommodations, refer to properties rented out for periods typically ranging from a single night to a few weeks. During peak holiday seasons, short-term rentals are a booming business in a tourism-focused town like Kiama.

Airbnb, Holiday Homes, and Flexibility

Short-term rentals give you:

• The freedom to rent your property when it suits you

• The option to use the property for personal stays

• Higher rental rates during peak periods (summer, public holidays, school breaks)

This flexibility is ideal for property owners who split their time between locations or want to use their Kiama home for occasional weekend getaways.

Seasonal Peaks and Revenue Potential

Tourist demand in Kiama spikes during:

• Summer (December–February)

• Easter and long weekends

• Whale-watching season (May–July)

During these times, nightly rates can range from $250 to $600+, depending on the property's location, views, and size. A 2-bedroom coastal unit might generate $3,000+ per month during peak, while a larger family home with sea views can earn $5,000+ monthly. These figures represent the potential for significant returns, especially during peak seasons.

But when winter hits and bookings slow, those numbers dip. It's feast or famine—part of the short-term rental game.

What Are Long-Term Rentals?

Long-term rentals, conversely, refer to properties leased out on residential tenancy agreements—usually for 6 or 12 months, sometimes longer. These properties are typically unfurnished or partially furnished, and tenants live in them as their primary residence.

6–12 Month Leases and Stability

Unlike short-term lets, long-term rentals provide:

• Predictable, consistent monthly income

• Fewer gaps between tenancies

• Less day-to-day management

In Kiama, the median rent for a 2-bedroom unit sits around $550–$600 per week, while a 3-bedroom house averages $650–$800 per week, depending on location and condition.

This model suits investors who prefer a set-and-forget strategy and want to avoid the hands-on nature of holiday letting.

Ideal Tenant Profiles in Kiama

• Local families and professionals

• Sydney commuters are working hybrid roles.

• Downsizers and retirees are relocating from the city.

• Students or staff from nearby educational institutions

The demand is real—and rising. Kiama's tight rental market means strong occupancy rates and high tenant retention.

Pros and Cons of Short-Term Rentals in Kiama

Short-term rentals can be lucrative if you're prepared for the hustle.

✅ Pros

• Higher rental returns during peak seasons

• Greater flexibility (you can block dates for personal use)

• Attractive to tourists, business travellers, and event attendees

• The property is cleaned regularly, helping to maintain its condition

❌ Cons

• Income is seasonal and inconsistent.

• Higher management demands (cleaning, check-ins, bookings)

• Must comply with STR regulations in NSW, including registering with the government

• Negative reviews can impact bookings and revenue.

• Insurance policies are often more expensive.

Short-term success often depends on your willingness to either self-manage or pay a premium for a property manager specialising in holiday rentals. In Kiama, many owners hand the keys to professional managers to handle the work and optimise listings.

Pros and Cons of Long-Term Rentals in Kiama

For a good reason, long-term rental properties are the traditional route for property investors.

✅ Pros

• Steady, predictable income year-round

• Tenants cover utilities and often minor maintenance.

• Lower management fees and fewer property turnovers

• More straightforward tax and record-keeping

❌ Cons

• Lower returns during peak seasons compared to short-term lets

• Less flexibility—you can't stay on your property.

• Risk of difficult tenants or rent arrears

• Property wear and tear may go unnoticed between inspections

Long-term rentals in Kiama offer peace of mind for those looking for a more hands-off investment. With a good property manager and tenant screening process, landlords can enjoy a more relaxed lifestyle, knowing their investment is in good hands. Financial Comparison: Income, Costs, and ROI

When choosing between short-term and long-term rentals in Kiama, it is essential to look beyond gross income and examine the actual costs, effort, and return on investment (ROI) associated with each model.

Short-Term Rental Financial Snapshot

Earnings Potential (Peak Months):

• 2-bed apartment: $3,000–$4,500/month

• 3-bed coastal home: $5,000–$8,000/month

Expenses:

• Management fees (up to 20–25% of revenue)

• Cleaning and linen service ($80–$200 per turnover)

• Higher insurance premiums

• Booking platform fees (e.g., Airbnb takes ~3–15%)

• Council rates, utilities, internet (owner pays all)

Bottom Line:

 While the headline figures look great, the net income may be closer to 50–60% of your gross due to the intensive operating costs. Still, if you maximise occupancy during holidays, you can earn significantly more over a year than with long-term rentals.

Long-Term Rental Financial Snapshot

Earnings Potential (Year-Round):

• 2-bed apartment: $550–$600/week ($2,200–$2,400/month)

• 3-bed house: $650–$800/week ($2,600–$3,200/month)

Expenses:

• Property management fees (typically 6–8%)

• Routine maintenance and repairs

• Council rates, some utilities (tenants often pay electricity/water)

Bottom Line:

 Long-term rentals may not have dramatic spikes in income, but they offer more consistent cash flow and lower stress. Your annual ROI may be lower than with a successful short-term let, but your workload is also much lighter.

Legal and Regulatory Considerations in Kiama

Understanding the legal landscape is crucial for considering short-term or long-term renting. In Kiama, rules can vary depending on your property's location and zoning.

Short-Term Rental Regulations

In NSW, short-term rental accommodation (STRA) is governed by a statewide framework, but local councils—including Kiama—can apply additional rules.

Key points:

• All STRAs must be registered with NSW Fair Trading

• Hosts are limited to 180 days per year for non-hosted listings in certain zones

• Properties must comply with a Code of Conduct covering noise, parking, and guest behaviour

• Fire safety requirements must be met (e.g., smoke alarms, extinguishers)

Kiama Council has shown support for STR, but with increasing demand, further restrictions or caps could be introduced to protect residential amenities.

Long-Term Rental Regulations

Long-term leasing is covered under the Residential Tenancies Act 2010 (NSW).

Landlords must:

• Lodge bonds with the Rental Bond Board

• Use standard lease agreements

• Follow strict procedures for rent increases, repairs, and evictions

While the regulations are clear-cut, they favour tenant stability and fair treatment, so be prepared for less flexibility than short-term arrangements allow.

Property Suitability: Which Homes Work Best for Each?

Not every home in Kiama is suited to every rental strategy. Understanding your property's strengths can help you play to your advantage.

Best for Short-Term Rentals:

• Homes with ocean views, close to the Blowhole, Surf Beach, or the town centre

• Well-furnished and styled interiors

• Easy access and private entry

• Quirky or Instagram-worthy features (e.g., outdoor tubs, fireplaces, balconies)

Holidaymakers are paying for an experience, not just a place to sleep. If your property delivers a wow factor, you'll earn more.

Best for Long-Term Rentals:

• Solid, practical homes near schools, shops, and public transport

• Low-maintenance yards

• Reliable heating/cooling and quality finishes

• Quiet residential streets

Tenants who are renting long-term want comfort, reliability, and convenience, not flashy extras. They want livability, not luxury.

Owner Lifestyle: Are You Hands-On or Hands-Off?

Your lifestyle plays a significant role in what rental model makes sense. Ask yourself:

Do you want to be involved?

Short-term hosting might be your jam if you love hospitality, are tech-savvy, and don't mind replying to messages at 10 PM.

Do you prefer to set and forget? Long-term rentals offer peace of mind, especially with a great property manager handling the details.

Do you want to use the property yourself?

If you plan to spend weekends or holidays in Kiama, short-term lets allow flexibility and personal access.

But be aware: vacancy between bookings isn't the same as availability. High season means bookings take priority.

Market Trends in Kiama: What the Data Says

Understanding Kiama's current and future market trends can help you make a more informed rental decision. Knowing where the market is heading is essential, whether you're a property owner or considering investing.

Tourism Numbers and Short-Term Appeal

Kiama continues to enjoy strong tourism figures, with more than 1.5 million visitors annually pre-COVID, and numbers are steadily climbing again. Key drivers include:

• The iconic Kiama Blowhole

• Whale-watching season (May–July)

• Local festivals and events

• Kiama's position as a popular weekend destination in Sydney

The short-term rental market thrives on these events, with occupancy rates spiking to over 85% during peak seasons. Even off-season bookings remain strong for well-presented, centrally located properties.

Rental Vacancy Rates and Long-Term Demand

On the flip side, Kiama's long-term rental market is tight. Vacancy rates often hover around 1%–1.5%, well below the national average. Factors driving this include:

• A limited supply of rental stock

• An influx of tree-changers and sea-changers

• Families relocating from Wollongong and the Sutherland Shire

As more Sydneysiders explore hybrid or remote working arrangements, demand for permanent rentals in coastal towns like Kiama is rising. This trend is expected to continue well into the next decade, with strong rental yields and low vacancy rates creating a stable investment environment.

Conclusion: Making the Right Move for Your Kiama Property

Choosing between short-term and long-term rentals in Kiama is less about which is better and more about which is right for you.

Suppose you're looking for flexibility and higher returns during tourist season and don't mind being hands-on. In that case, a short-term rental might be the perfect fit—especially if your property has a great location and charm.

But if you prefer steady income, fewer interruptions, and a low-maintenance investment, the long-term route offers reliability and less stress, especially in Kiama's ultra-tight rental market.

Consider:

• Your property's features and location

• Your income goals

• Your availability and lifestyle

• Current and future regulations

Ultimately, both strategies can work well in Kiama. The real win is owning a piece of this stunning coastal town in a market where demand is strong, supply is limited, and the future looks bright.

FAQs

Q: Can I rent my Kiama home short-term and switch to long-term later?

A: Yes, but remember that any tenancy agreements must be honoured, and switching back to short-term may require re-registration under STRA rules.

Q: Is Kiama Council cracking down on short-term rentals?

A: Not significantly, but they do follow state guidelines closely. Properties must be registered; some residential areas have day limits and zoning restrictions.

Q: Which rental model earns more overall in Kiama?

A: Short-term rentals typically earn more during peak seasons, but long-term rentals provide consistent, year-round income and require less active management.

Q: What's the best property type in Kiama for short-term rentals?

A: Homes with ocean views, proximity to the Blowhole or Surf Beach, or unique features (like fireplaces or outdoor tubs) perform best.

Q: Is it easy to find tenants for long-term rentals in Kiama?

A: Yes. With low vacancy rates and high demand from local families and professionals, well-maintained properties rarely stay on the market long.