Who are the winners and losers in Singapore's proposed rules on Airbnb-style rentals?

Owners of small long-term leasing projects in areas like Killiney, Novena, Newton, and Serangoon are poised to benefit, an analyst says.

If you live in a condominium and have been renting out your individual space through sharing platforms like Airbnb, the process of doing so is bound to get harder. When the Urban Redevelopment Authority (URA) proposed regulations for Airbnb-style leases, or what it called short-term accommodations (STA), it involved getting the opinions of all the property owners for the STA use.

For non-strata-titled properties, owners can decide on the matter, whilst for strata-titled properties like apartments, the views of all strata-titled property owners must be obtained. URA required an 80% approval threshold instead of 100% as "it may not be practical to get consensus from 100% of the owners."

In an interview with Singapore Business Review, OrangeTee Research and Consultancy head Christine Sun feels that a key intent of the proposed ruling is to confine Airbnb-style home-sharing to only certain condominiums or locations in Singapore. "It will not be easy to obtain 80% consent rule from mega-sized condominiums especially mass market homes, as many homeowners would have purchased these homes for their own stay and their resistance towards Airbnb-style home sharing is likely to be strong," she said.

Meanwhile, Cushman & Wakefield senior director of research Christine Li thinks that there might not be a significant impact on strata-titled properties due to the requirement for 80% consensus. "As it is rather unlikely that 80% of owners (by share value) in a particular development purchased their unit with the intention to offer short-term rentals, the required consensus level will probably not be achieved easily. In order for the minority STA-desiring owners to achieve 80% consensus, they may have to offer significant concessions such as the payment of significantly higher maintenance fees to offset the dis-amenities resulting from transient tenants," she said.

"For properties which are not strata-titled, URA has stated that it is unlikely to approve STA use in such areas. This would imply that only a small pool of properties will eventually obtain approval for STA use," she added.

Still, the impact of the proposed regulations remains unclear for Airbnb's community of hosts and guests in Singapore which, Airbnb Singapore head of public policy Mich Goh said, is as large as 1.4 million users. She responded, "We’re committed to reasonable solutions that will allow responsible home sharing to thrive in Singapore and welcome the opportunity to provide feedback through the consultation process. This public consultation is an important step for the significant number of locals who want to share their homes, and travellers who want a unique and authentic experience when they visit Singapore."

If the regulations present some bad news for some of Airbnb's condo unit owners, they could still be good news for those that own smaller projects. Sun said that smaller projects or those with many small-format units are likely to receive higher consent as they are usually bought by investors with the intent of long-term leasing. "Smaller condominiums and apartments in areas like Killiney, Novena, Newton, Telok Kurau, Tanjong Katong and Serangoon, that have been traditionally popular among foreign tenants, would likely see higher conversion chance to Airbnb-style home-sharing. Some luxury and mid-tier condominiums or projects near MRT stations could also be converted as well," she added.

For now, the proposed ruling should help to lower the current rental vacancy rates as more units can now be put up for short-term rentals. "Moving forward, buyers should consider this ruling in their future home purchases - homeowners should avoid smaller projects as they are likely to be converted to Airbnb-style home-sharing; whilst investors should go for these projects to maximise their capital yield as they can now lease the unit out more often through Airbnb-style home-sharing," the analyst said.

The analyst noted that the ruling seems to balance both the needs of homeowners and investors well. "After all, Airbnb-style home-sharing is a global trend and Singapore being an open-economy would continue to see growing demand for such homes from foreign visitors," Sun added.

The challenge is still up for URA to strike a balance between being open to disruptive start-ups such as Airbnb and safeguarding the interests of residents living in high-density dwelling units, Li noted. "The new STA category accomplishes this by offering the possibility of STA whilst simultaneously ensuring that minority residents are able to block STA if desired. Whilst the residential leasing landscape is weak at the moment, the framework is unlikely to alter the landscape significantly due to the proposed 90-day cap. As such, landlords are still dependent on longer-term tenants who are working and living in Singapore, rather than short-term tourists," she added.

Li also cited studies in other markets have found that Airbnb listings resulted in increased rents, which may consequently lead to higher property prices. "However, these markets may not have the same 90-day cap as Singapore. In Singapore’s case, it is plausible that owner-occupiers who value peace and privacy may shun strata-titled projects with STA-use, leading to lower prices in the development," she added.