Hot trend in real estate - Short-term rentals pushing up prices
Published:Thursday | October 4, 2018 | 12:00 AM
The rise of the short-term rental market facilitated by online sites, led by Airbnb, has increased housing prices in key areas, according to real estate experts.
"Right now, the going is hot," said Howard Johnson Jr, president of the Realtors Association of Jamaica, RAJ, at a symposium on short-term rentals, hosted by the group in New Kingston on Wednesday. "The return on investment is good."
Johnson then likened the frenzy to that of the unregulated Ponzi schemes that operated in the early millennium. Those who jumped in early made a killing, while others lost a lot.
"It is all about timing. And right now, people are getting good returns offering short-term rentals," he said.
Local hosts earned about $1 billion in 2017 from listings of around 6,000 rooms on Airbnb. Johnson never gave a precise range on the return on investment or how it compared to investing similar funds in the stock market, reportedly described as the top market in the world over five years. He, however, analogised that a landlord can earn a month's rent in about 10 days from short-term stays.
In the capital city of Kingston, hosts generated some US$2.4 million in 2017 from the site facilitated by what Johnson called key zones. These included the education zone in Mona, the leisure and cafÈ zone in Liguanea, and the entertainment and culture zones in Trench Town and downtown. Homes in these areas are seeing uptick in prices, he said.
But the craze comes with concerns. Rose Bennett-Cooper, chairman of the Rent Assessment Board, indicated that short-term rentals are at times pushing professionals out of affluent neighbourhoods into lower-tier apartments. Bennett-Cooper told the story of a recently divorced, highly educated mother who needed an apartment.
"She did everything right ... but places she could afford two years ago, she cannot anymore. It is because of short-term rentals," said Rose Bennett-Cooper.
She added that some strata residents are seeking advice from the Rent Board to block residents from offering short-term rentals in their complex. She explained that there is disagreement among lawyers on whether the term 'tenant' can always be ascribed to someone who rents short term. And that can create some uncertainty.
"Lawyers are going to have to reach for laws that were never reached for before," said Bennett-Cooper.
She recommends that new strata explicitly address the matter of short-term rental in the bylaws.
"Be very clear on the language used," she said, adding that the revision of the Rent Act could include a section addressing short-term rentals.
Julian Patrick, director of product development and community tourism at the Tourism Product Development Company, TPDCo, said that Airbnb is providing opportunities for community tourism.
"Now the wealth distribution is now more even," he said adding that Trench Town is one of the largest markets for Airbnb in Jamaica, but that there are other non-traditional areas springing up. "We are seeing busloads going to Waterhouse to learn new dances," he said.
Patrick acknowledged that inner-city tourism comes with risks.
"Hosts have to understand that persons renting want to leave with their lives," said Patrick. "They also want to be able to record their experiences, but need to find their devices at the end of the day."
Larissa McBean, a manager at TPDCo, said that outside of Kingston, models of short-term rentals include Treasure Beach, where persons can walk anywhere at any time of night. Such models, she said, allows the community to benefit rather than the owners of hotels.
Joe Schneider of the National Association of Realtors in the United States, quoted a study which found that in New York the medium rent in the city increased by $380 due to short-term rentals. "That's a lot of money and I only see it going higher," he said while addressing the RAJ symposium.
Schneider said that some US cities are concerned about the growth of short-term rentals and had set up boards in order to regulate short-term rentals and protect residents from displacement.