Are New Projects Worth Buying Just For The Sole Airbnb Logic in 2020?
The short term rental giant Airbnb had been in the market for 8-10 years now. Early adopters to the technology giant reaped in great rental returns hosting guests to their lovely homes back in 2012. Some hosts are generating 200-300% fold for their investment.
Fast forward 7 years on, today, 2019 had been a totally different landscape for the short term rentals. Without regulations of the industry, hundred of thousands of newly completed properties flooded the market with the promise of 'Rental Covered', 'GRR', 'Airbnb operators contractual guaranteed' and so on. How would the short term rental landscape differs 2012 vs 2020? Below are a number of factors.
First, we look at the supply. Back in 2012, there's lesser supplies in the market with the same demand, this had resulted in higher occupancy rate regardless of interior quality of the property and location. Every host back then will have a great investment tale story to tell of their journey with Airbnb. Life's good back then!
Today, we see hundreds of properties flooding the market be it subsale units, completed units and newly launch units. With higher supplies at a stagnant demand, hosts are finding it difficult to hit monthly 80-90% occupancy rate with the same pricing as 2012.
Our verdict for 2020 : Supplies will still climb at a rapid rate next year as more newly completed properties will enter the market. If you're looking to invest, look for lower density properties or landed. Supplies for landed are generally lower and demands among guests remained high!
Interior Property Quality
With increased competition and supplies, the winning factor to secure higher reservations rate will be the interior design of your property. Today's millennials seek a lifestyle and celebratory themes. Guests wants great mobility, flexibility and social inspired statements. A great interior design theme attracts eyeballs and reservations. Home owners who invested heavily on interior and believe in the home-sharing model know that this investment is a must be it short term or long term rental.
Our verdict for 2020 : Host who focuses on design centric based homes will likely to secure higher occupancy rate reservation.
To compete on a fierce competitive market, pricing has been a major role playing factor. Today we see homes on Airbnb platforms selling at a low subpar rate of MYR 70-150/night for a studio. Big operators who have the capacity to leverage on the loss to increase market shares are throwing prices from as low as MYR70/night in a posh city centre service residence. Questions remained whether this is sustainable in the long term.
Looking at the outskirts of KL city such as Cheras, PJ, Kota Damansara area, pricing for 2 bedroom are still looking strong at MYR 180-280/night. Hosts are still able to cover their rentals and generate a healthy returns between 20-40% for a 2-3 bedder.
Home owners who owns 1 bedroom or studio are facing a slightly challenging time to fill up the occupancy. With great interior design, location and competitive pricing, a studio will still be able to pull off to generate mild returns.
Our verdict for 2020 : While there's a strong pricing war going on among short term rentals, prices are still stable for 2-3 bedrooms properties. Landed generally performed better than high-rise condominiums. With the correct marketing, home owners will still be able to generate a healthy returns vs monthly operations expenses.
Agencies Marketing Gimmick
Have you ever come across a Facebook ads enticing potentials buyers on guaranteed cover as below?
Misleading sales marketing is a norm on Facebook by property agencies. Fake property pictures and guaranteed return statements could often lead to bad or ugly investments. Always do your due diligence when purchasing a property. Factors such as property developer reputation, density and location are prime factors to consider. Don't blindly fall for a promise of 'Suitable for Airbnb Investor' with a low entry cost.
Although there are numerous false marketing by property agencies, there are still some good apple property agencies around.If you're looking to invest for short term stay, always consider the entry cost vs returns, connectivity options, future developments around the area and not forgetting potential Airbnb short term accommodations regulation law which might be implemented in a couple of years.
Our verdict for 2020 : The trend of property agencies enticing buyers with over promised returns are a norm on social media platform. Again, many new developments will flood the market in 2020 which created an overhang supply situation. Invest with care!
2020 will be an even more challenging year for solo hosts. In an ever competitive market, property owners who implement structure marketing plan, great operations schedules and knowledge of the industry will be able to pull off a healthy return. Long term rentals is also a great option to explore should you find a good paymaster tenant. We foresee a short term regulation coming by the local authorities next year, with better regulations, comes better industry quality for the home-sharing segment.
And yes.... new projects are still worth investing should all the factors fits in the perfectly. Happy Investing!
This article is first appeared on LazyHost.co. The author Andrew Koo is the co-founder of LazyHost HomeBell Asia with passions in sky scrappers, photography and live music performances.
LazyHost is a short term accommodation hospitality operator specialises on property management in Kuala Lumpur, Bangkok and Chiang Mai. We provide property management consultation to property developers, hoteliers operators and home owners.