This article was first published by Aspire.
It has just gotten clearer that Singaporeans have one less way to make money now.
According to an article by the Straits Times, a new law passed by the Parliament on last Monday (6 Feb) stated that it is illegal for private apartment owners to rent out entire apartments and rooms for less than six months, unless they are permitted by the Urban Redevelopment Authority (URA) to do so. Of course, the same applies to public housing too.
Airbnb popular passive income generator for home-sharers
Despite short-term rental activities now being confirmed as illegal in Singapore, Airbnb had been a popular option to build passive income in Singapore. According to a Straits Times article dated Dec 2016, Airbnb had about 7,000 property listings in Singapore as of November 2016. In a year, the average Singapore Airbnb host makes about $5,000 and receives guests for 45 nights.
That is only if you do not get caught! If convicted, homeowners can be fined up to S$200,000 or be jailed for up to 12 months. In fact, two homeowners actually lost their flats, just by leasing out the flats to multiple tourists for between S$25 and S$75 per night. Boh hua right?
Regarding which, Moneysmart.sg suggested a few probable reasons to why these two owners just happened to be so “suay”.
- They could have made it too obvious by running an overcrowded full-time hostel. With crazy cheap rates of $25-$75 per night, you can imagine that they have probably turned their homes into “tourist concentration camps”.
- Excessive or rowdy visitor activity could have caused a lot of disruption to their neighbours, who then ratted them out to the authorities. After all, HDB units are built very closely to one another and they share many common areas like corridors, lifts, staircases and void decks.
There’s good reason for tightening regulations, though
But before we complain that the government just wants to make more money, maybe there’s more to it. Besides, the URA is studying the option of creating a new category of private homes that will be allowed for short-term rentals.
Furthermore, Singapore is not alone. In other cities around the world, including New York, London and Paris, have been enforcing strict regulations on short-term rentals as well. They have good reasons for that – hotels and other accommodation providers have always faced such regulations for as long as we can remember.
Though Airbnb is actually meant to promote fair home sharing, there might be people who abuse the platform to turn their apartments into illegal hostels/hotels, so that they can enjoy extortionate profits as “slumlords”. They should have the freedom to do what they wish with their own property, no doubt, but not at the expense of their neighbours.
Not so hot for Airbnb but better for hotels
Noting that Airbnb is indeed a disruptor in the hospitality space, these tighter regulations can be seen as a way of saving the hotel industry. According to a Bloomberg report in 2016, the average Room Revenue per night – which is a key statistic used in the hotel industry – in Singapore has fallen to its lowest since 2010. This move by the Singapore government might actually “level” the playing ground for hotel owners and Airbnb hosts.
On a side note, local blogger AK wrote in an article that he expects Ascendas Hospitality Trust (AHT) to be a better passive income generator for him this year (since he’s an investor and not an Airbnb host). Could he be referring to the fact that the Singapore Parliament is making short-term rentals illegal? Nevertheless, REITS investors should definitely pay close attention to this matter. Below is a pretty infographic about Airbnb’s business model.
Infographic about Airbnb’s business model
Airbnb Business Model. Image source: Business Model Toolbox
Shares Investment and its editorial arm, Aspire, believe that everyone needs financial literacy. We work towards achieving that goal by helping retail investors make more informed investment decisions by presenting well-researched data in condensed and relatable formats, across our websites, magazines and offline events.
Managing your finances can be very stressful, but Seedly is taking a swipe at making it a lot easier. Track your expenses for FREE today!
Download Seedly now: http://get.seedly.sg/Seedlynow