When can Singaporeans finally lease homes to short-stay tourists?
Since June 2017, homeowners in Singapore are allowed to lease their homes for a minimum period of three months, from six months previously. While this has been lauded as a step forward for homesharing platforms like Airbnb and Homeaway, it is still far from ideal as most tourists typically need an accommodation for less than one month.
This could help solve some of Singaporean’s retirement funding issue. Why should hotels monopolise the tourism sector? Instead why not allow retired HDB home owners to rent out one room for bed and breakfast?
What would be a most horrible scenario would be people buying properties in Singapore for airbnb and Homeaway further making housing even more unaffordable.
But should it ever be allowed for people who already own more than one property? Availing this facility will be further enriching the wealthy.
The Singapore government has been cautious and is currently looking at how to tweak regulations further.
But it seems like some home owners are not waiting and are already leasing out their homes for periods shorter than the minimum lease period despite potential fines of up to $200,000.
A quick check online at a homesharing website for a two-day stay would throw up a number of options. And if you read the reviews, you will discover that some of them mentioned staying for only a few days.
So when will the government officially allow this?
Win-win for landlords and tourists
Airbnb has thrived elsewhere in countries like Japan, US, Europe and even in Africa. Homesharing has been welcomed both by homeowners, seeking a side income and tourists looking for lower cost accommodation and a different experience compared to staying in a hotel.
In Singapore, it is understandable why homesharing is welcomed by some landlords, especially in the current tenants’ market.
Compared to leaving their property empty, renting it out will earn them some good side income, which is at a higher daily rate compared to longer term contracts.
For instance, a 2-bedroom apartment near Great World City, which can fit 6 guests, is available on Airbnb at $169 a night. Assuming 30 days in a month, this translates to $5,070 a month compared to the longer-term contract rental rate for $3,800 a month for a similar sized room in the same area.
For tourists, this is a cheaper option compared with staying in a hotel. For instance, the price for just one room for two guests at a hotel in the same area could cost as high as $260. This means tourists who were initially put off by the high cost of hotels would now be open to visiting Singapore with this homesharing platform.
Winning over the local community
Despite the benefits, one still can’t legally lease their homes to short-term stay tourists.
Homesharing platforms have to address concerns about the impact on hotels, which contribute to jobs and the economy, and residents in the area who value the exclusivity and privacy of their homes.
To win over the government and local community, Airbnb has conducted studies to show the positive impact on the community.
In a study on Japan, the Airbnb community claimed to have helped to boost the Japanese economy by 222 billion yen. Airbnb added the benefits include attracting new visitors to Japan, who stay longer, spend more and are more likely to return, as well as increasing consumer choice, providing authentic and local travel experiences for guests from around the world.
Homeowners waiting on the sidelines for loosening of regulations for homesharing will be hoping the government heeds their calls so they can earn possibly a few thousand more dollars a year. But it looks like it will take some time before it will be legal.
As there is currently more development charge levied on commercial property zones. If a place is zoned for commercial use, the development charge is higher than that of a residential zone.
Lower room rates means developers will not bid so high for commercial land plots for hotel use. This represents loss of government reserves as any land sales proceeds goes into the reserves.
Since the residential properties are already in the market, there is really not much appetite to help home owners make money.
Talk to a mortgage broker if you are wondering how to monetise your property.