Austin is the capital city of the state of Texas. With a population of over 981,000 people, it is the 4th most populous city in Texas and the 11th most populous city in the US. The Austin real estate market benefits from the fact that the population growth rate in the city is over three times the national rate, as estimated by PWC. Thanks to a strong annual net migration, Austin is the fastest growing large city in the US. And with more than half of the population (54.8% according to NeighborhoodScout) renting rather than owning a home, Austin rental properties enjoy particularly high demand and occupancy rates.
Austin was recently named the #1 place to live in America by Forbes for the third year in a row, based on affordability, job prospects, and quality of life. Many people flock to the city hailed for having not only the best business climate, but also the best quality of life in Texas and a relatively low cost of living. In fact, Austin has a heavy concentration of highly educated millennials and enjoys a diverse economy that is mainly based on the government, education, and technology sectors which draws people in.
Given the nickname “Silicon Hills”, Austin is a major center for high tech and innovation. It is home to nearly 6,500 high tech companies, including Apple Inc., Google, Facebook, Dell, Amazon, eBay, and many others. Apple Inc. has plans to open a new $1 billion campus in North Austin with the capacity for 15,000 employees, making it the largest private employer in the city. The University of Texas at Austin is a major contributor to the city’s economy, with thousands of Engineering and Computer Science graduates each year finding employment in the technology and defense industry sectors. Austin is also a recognized hub for startups and is one of the most significant cities in the US for entrepreneurship. It ranked #4 of the best large cities to start a business last year in WalletHub’s annual survey. Several federal agencies, including the US Federal Government, are based in the Austin area and are some of the largest employers in the city. Austin is also emerging as a hub for biomedical and pharmaceutical companies, with about 85 of such companies located there. Other major industries in Austin include telecommunications, manufacturing, electronics, food processing, and tourism.
The Austin real estate market was named the 6th most important US Market to Watch by PWC in its annual Emerging Trends in Real Estate: United States and Canada 2019 report. According to the report, Austin is particularly attractive to real estate investors for its booming economy, demographic growth, and attractive cost structure. Despite the attractive affordability rates, a lack of affordable housing was listed as an issue, due to sheer demand.
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The Austin real estate market has witnessed a strong real estate appreciation in recent years. Since Q1 of 2000, Austin properties have experienced a total appreciation of 148.47% according to NeighborhoodScout, which is an average annual home appreciation rate of 4.84%. Property value is still climbing in the Austin housing market as Zillow reports an appreciation of 6% in 2018. The huge number of people and companies moving to Austin is behind this increase in home prices. Still, Austin home prices remain relatively affordable compared to other top markets in the US. That’s why buying an investment property in Austin makes for a good real estate investment.
The Austin housing market is currently a warm seller’s market. Housing inventory is low, while demand from homebuyers and real estate investors continues to rise as the population grows. This situation enables Austin real estate investors to enjoy high real estate appreciation.
The short-term rental industry in Austin has thrived in recent years. The city’s scenic parks, lakes, and famous music festivals pull in millions of tourists each year. Austin is by far the most popular destination for Airbnb rentals in Texas, with 30% of the 1.5 million arrivals in the state staying in Austin short-term rentals in 2017.
In 2016, Austin passed a number of regulations for short-term rentals (STRs). The Airbnb regulations phase out and will ultimately outlaw non-owner occupied short-term rentals in residential areas, which are referred to as “Type 2 STRs”. The full ban on Type 2 STRs will come into effect by April 1, 2022. Therefore, to operate within the bounds of the new Airbnb Austin regulations, the owner of a short-term rental property must be on site during the guests’ stay: This type of rental is referred to as “Type 1 STR”. Another possibility is to operate a short-term rental that is part of a multi-family residence (“Type 3 STR”).
Owners of short-term rentals are required by the city of Austin to obtain an operating license costing $500 and renew it annually for $300. This applies to all properties rented out for less than 30 consecutive days. The licensing process requires Airbnb hosts to pay Hotel Occupancy Taxes and also obtain a Certificate of Occupancy.
The regulations also impose certain requirements for advertising, set requirements related to noise and music, set occupancy limits, prohibit certain types of gatherings, establish inspection-related requirements, and give city officials the authority to deny, suspend or revoke licenses if any of the rules are not followed.