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Japan short-term home rental market shows promise but rewards slow to come
[TOKYO] Japan seems to have the right mix for developing a vibrant short-term home rental market: a rapidly growing tourism industry, a cheap currency and - unlike many countries - 8 million vacant homes.
Adding to the attractive business case is a reform-minded national government keen to loosen regulatory curbs and develop the market ahead of the Tokyo Olympics in 2020.
And despite some obstacles from local governments, home rental website Airbnb has listed thousands of properties in the hope of drawing tourist money, and others hope to follow. "Tourists coming to Japan are on the rise, and there's definitely the need for this type of service," says Takashi Sagara, a manager at real estate agency Able Inc, which plans to connect home owners with an Airbnb-style service.
Business hopes have been fuelled in no small measure by Prime Minister Shinzo Abe's push to cut red tape as part of his'Abenomics' policies to jump start Japan's long-stagnant economy.
While renting properties for long-term accommodation is legal, current rules on short-term rentals are strict: owners can't legally let their homes without a licence, hotel-style reception desks and minimum room sizes.
Abe has proposed to relax these curbs. Along with looser visa rules and a substantially weaker yen, the move promises to add to the explosive growth in tourist arrivals and boost broader economic activity.
Rental homes offer an attractive alternative to pricey hotels, which in Osaka, for example, are often near capacity at weekend.
Visits to Japan jumped 27 per cent in the year to October to an estimated 11 million. The government is targeting 20 million tourists a year by the time of the Tokyo games.
With one in seven properties standing vacant in 2013, Japanese home owners are well placed to benefit from this influx. The vacancy rate, rooted in a declining population and a preference for buying new homes, could rise above 20 per cent within 10 years, says the Nomura Research Institute.
By comparison, less than 4 per cent of German homes are vacant. In the United States, whose housing sector was badly hit by the 2007 financial crisis, the rate is around 14 per cent.
Able's partner Tomareru estimates the short-term home rental market initially to be worth around 100 billion yen annually (US$840 million).
But firms hoping to cash in are having to temper their plans until local governments in Tokyo and Osaka take steps to relax curbs.
Opposition from lawmakers in these cities highlight some of the challenges Abe faces in implementing broader structural reforms.
In September, Osaka legislators voted down a bill to loosen regulations, citing community worries about noise and safety. Vested interests are another roadblock. "I'd love to get into the business. But hotels and inns have a real interest in protecting it, so oppose reform," said Daisuke Shigematsu, CEO of Spacemarket, a start-up that matches quirky vacant houses and other spaces with venue-seeking clients.
Still, these obstacles haven't stopped Airbnb from listing around 4,000 properties for Japan, although that's only a tiny fraction of its 1 million listings worldwide.
Other Japanese businesses are more cautious. Opposition from Nagano prefecture in central Japan has already caused Yahoo Japan Corp to scrap plans for a short-term home rental business.
Internet giant Rakuten Inc has been weighing a move into the industry, people with knowledge of the plans told Reuters this year. Rakuten declined to comment.
Able and Tomareru are prepared to enter the market, with more than 2,000 vacant properties in Osaka already lined up. They are hopeful that proposals to appease neighbourhood concerns will help overcome opposition to Abe's proposals in at least some districts by the start of the next business year in April. "Even if we don't see immediate results, our expectations are huge," Sagara said. "We have to try it."