Johor Baru property owners ride on surging demand for short-stay homes

HAVING halted their cash-out plans in anticipation of rising property prices, many Johor Baru property owners are instead turning their vacant units into short-stay homes to cater to robust tourism activity in the state.

Ming Lee had initially intended to sell his condominium unit near KSL City Mall, but decided to resume letting it out on Airbnb after seeing the influx of tourists following the reopening of land borders with Singapore this April.

His 2-bedroom unit had been left vacant since the Malaysian government first announced a mandatory control order – a lockdown measure to curb the spread of Covid-19 – in March 2020.

He had intended to sell his unit when the loan moratorium ended in 2021, but could not find a suitable buyer. Some asked for exorbitant discounts of up to 40 per cent, while other interested buyers failed to secure housing loans.

“Without the income from Airbnb and loan moratorium, I find it hard to pay for my monthly housing loan instalment for two properties – my condo near KSL and another property which I am staying in now,” he told The Business Times.

Lee is not alone in tapping the opportunities created by surging weekend demand for short-stay homes in Johor Baru.

Raymond Koo, founder of short-term rental management company JB Minsu, said demand for short-stay properties has increased significantly for the past few months – especially during the Hari Raya long weekend and school holidays, when almost all of their managed properties were taken up by travellers.

JB Minsu currently manages 350 properties in Johor Baru. On regular weekends, 70 per cent of the managed properties are rented out, Koo noted. Most of the customers – around 70 per cent – are Singaporeans, who come to Johor Baru to visit their relatives or have a short getaway.

“Room prices have increased due to strong demand. We observed that the pricing for short rentals has gradually increased to pre-pandemic level,” he said.

For example, the daily rate for a studio apartment in KSL D’Esplanade Residence was below RM120 (S$37) in January. Now, similar units are priced between RM150 and RM235 a night, depending on the unit condition and location.

Popular locations include properties near mega shopping malls such as Mid Valley Southkey, KSL City Mall, and Johor Bahru City Square, as well as in neighbourhoods such as Danga Bay, Taman Bukit Indah, Taman Mount Austin and Puteri Harbour.

Samuel Tan, executive director of KGV International Property Consultants (Johor), said that one of the main factors that has boosted the demand for Airbnb rentals or short-term stays is the shortage of workers in the hotel sector.

“Many hotels could not handle the sudden surge of guests post-border reopening. This affected the service quality in terms of housekeeping and F&B services. Some travellers would rather opt for Airbnb for the self check-in feature and more choices,” he said.

Tan said that although price is one important factor for tourists in deciding where to stay, with health and safety rising in importance amid the pandemic, the main concerns are now the level of security, cleanliness, facilities, and location.

Kate Tee, a real estate negotiator from Eu As Properties, observed that the Covid-19 pandemic has changed the way people travel. While previously they may have looked for value-for money accommodation and spent more on sight-seeing, they are now willing to spend more on a staycation to spend time with their family and friends.

This has boosted the demand for larger units or a landed house for bigger groups, she said, adding that some bungalow owners have put in leisure facilities – such as foosball tables, barbecue pits and karaoke sets – to attract staycation goers.

“(Guests) don’t even mind paying RM3,000 a night to stay at a bungalow that comes with a swimming pool and can fit at least 20 people,” she added.

Yet despite the wealth of opportunities driven by robust tourism activity, Koo and Tan reminded property owners to think carefully before they venture into the short-stay business, as it might not prove as lucrative as it seems.

“There is high competition in Johor Baru,” said Koo. “Property owners would need to invest more on renovation and interior fittings to attract travellers. Tastefully renovated or well-equipped units with cooking facilities could attract staycation travellers.”

Property owners who do not want to spend a hefty amount on renovation – around RM25,000 to RM50,000 – should consider renting out the unit for the long term, he added.

Other than renovation costs, owners who are based outside Malaysia or do not have time to manage their properties have to engage short-term rental companies to look after their properties – from putting up rental listings, to cleaning the units and looking after customers’ needs during their stay.

This will eat up 20 to 40 per cent of short-stay profits, after deducting costs such as utilities and other miscellaneous charges, said Koo, adding that 80 per cent of his customers – the property owners engaging JB Minsu’s management services – are Malaysians who work in Singapore.

While short stays may be in demand now, owners should bear in mind that the revenue may not be able to cover their monthly instalments, especially during non-peak periods, said Tan.

“The escalating interest rate is another wild card that needs to be watched out for especially under the scenario of an uncertain income stream,” he added.