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Strict short-term rental rules likely to have limited impact

Strict short-term rental rules likely to have limited impact.

GIVEN the stringency of the newly-proposed regulations for the rental of homes for short-term stays, the impact on Singapore's leasing landscape will be limited, say property-market experts.

The Urban Redevelopment Authority (URA) on Monday began a public consultation on its proposed framework for regulating short-term stays, which could affect home-sharing platforms such as Airbnb.

Cushman & Wakefield Singapore head of research Christine Li, referring to the proposal that residents representing 80 per cent of the share value have to be in support of short-term rentals, said: "There might not be a significant impact on strata-titled properties due to the requirement for an 80 per cent consensus."

Citing the proposed annual 90-day cap on short-term use, she added: "While the residential leasing landscape is weak at the moment, the framework is unlikely to alter the landscape significantly."

Owners of private residential properties are currently barred from renting out their homes for less than three consecutive months, but the URA, after gathering public views on the matter in 2015, has worked with relevant agencies to develop a framework for regulating the practice.

Released on Monday, the framework includes qualifying criteria for homes to be used as short-term accommodation, and requirements and conditions for homeowners. It also lays out the roles and responsibilities of stakeholders such as Management Corporations (MCSTs) and short-term stay platforms, in ensuring rentals keep to the rules.

Each individual owner will have to register with the URA before listing the property for short stays.

But first, property owners will have to agree to their properties coming under a new use category of "short-term accommodation".

ERA Realty key executive officer Eugene Lim said this categorisation lets homeowners and investors make informed buying decisions.

For non-strata-titled properties, the owner or owners can decide and apply to be registered.

Referring to the requirement that the MCST for strata-titled properties (such as apartments and condominiums) get the support of at least 80 per cent of the share value, the URA said in its consultation document: "This is to ensure that a significant majority of owners... agree to the presence of short-term rental activities in their development."

Valid for a two-year period, this endorsement will have to be renewed with an updated vote each time. Experts said this requirement would, in practice, limit the impact of allowing short-term rentals.

Noting that it may be "extremely challenging" to obtain such consent, Withers KhattarWong senior associate Alex Toh suggested: "The character of an estate and the owners' interests and preference may differ from one estate to another - it is perhaps more appropriate for the owners of each individual estate to set their own approval requirements for short-term accommodation to be permitted within the estate."

In properties with mainly owner-occupiers, homeowners' security concerns will make it hard to get support, said CBRE head of research for South-east Asia Desmond Sim.

But the move is still significant for not "closing the door" entirely, he added, though he does not expect an impact on prices and demand.

ERA's Mr Lim said it remains to be seen if the move will have a material impact on prices, but expects smaller units such as one- and two-bedders to see more buyer demand.

The 80 per cent requirement and 90-day cap may be stringent enough to deter speculation, he added.

While studies in other markets have found that Airbnb listings resulted in increased rents - which may lead to higher property prices - these markets may not have a 90-day cap, said Cushman and Wakefield's Ms Li.

"In Singapore's case, it is plausible that owner-occupiers who value peace and privacy may shun strata-titled projects with short-term-accommodation-use, leading to lower prices in the development," she added.

Airbnb's head of public policy for South-east Asia Mich Goh said the platform is "committed to reasonable solutions that will allow responsible home sharing to thrive in Singapore".

Said Anton Stanish, vice-president for the Asia-Pacific at Expedia's Homeaway: "We support the need to fairly and effectively regulate the vacation rental industry and welcome the opportunity to collaborate on a path forward that addresses concerns and welcomes the vacation rental economy to Singapore."

The URA's proposal includes a licensing framework, under which platform operators will have to pay taxes in Singapore and face responsibilities such as ensuring that only registered residences are listed for rent.

Operators would have to take these additional business costs into account and see if Singapore remains a viable market, said TSMP Law Corporation partner and head of corporate real estate Jennifer Chia.

On the likely impact on the hospitality sector, Royal Plaza on Scotts general manager Patrick Fiat said: "Any additional room available in Singapore will have a direct impact on the hotels business and occupancy."

There is no longer the perception that Airbnb caters only to budget travellers, he said: "It is a platform which can cater to all budgets and types of travellers, similar to the segmentations of the hotels business."

The public may view the proposals and share their views at https://ura.sg/sta and the portal of government feedback body Reach. The closing date for submission is May 31, 2018.

Adapted from: Business Times, 17 Apr 2018