Airbnb in Malaysia: From A Property Investors Point of View

There has been a lot of attention on Airbnb in Malaysia these last couple of years and the spotlight has led to many investors curious of the legality and effectiveness of the platform, let’s look at Airbnb in Malaysia: From A Property Investors Point of View.

So, just what is the Airbnb business like in Malaysia and can it help you turn your most recent property investment into one that is cash flow positive each month?

Airbnb has become increasingly popular in Malaysia as a tool to increase rental yield. We’ve talked about this before and how it can be an effective tool in coping with your property loan repayments and as an alternative to traditional long-term tenancy.

Some of the top Airbnb’s in Malaysia have posted superior earnings that are upwards of RM80,000 a year!

So, just how sustainable is Airbnb in Malaysia and is it even legal?

The legality of Airbnb in Malaysia has been debated and discussed in many news articles over the past couple of years and has racked up hordes of supporters and haters on either side.

Majority of the supporters are property investors who have found it as a way to maximize their rental yield on their property investments, allowing them to reap superior gains of which they would have not been able to without it.

The haters on the other hand, are home owners who feel that their privacy is being violated by allowing strangers to come into the enclosed safety of their apartment complexes. While the others standing strongly against it have vested interests in budget hotels and say that their businesses have been strongly hit by Airbnb’s uprising.

What is the Government’s stance on it though?

In August of 2016, the Malaysian Government endorsed the home sharing platform saying that Airbnb is legal in Malaysia, following claims from the hotel industry that renting out residential properties in the country was illegal.

The Government said that, “Due to the nature of travellers drawn to cheap prices and the personal agreement made between the host and the traveller, Airbnb is considered legal. This is as long as no foul play or fraud is involved or intended, such as in cases of Internet scams.” [1]

The Government originally stated that they had no plans to issue any licenses or form of regulation covering the use of the platform but they might be reconsidering this for certain states. Currently only one state City Hall has come out and said that they have banned Airbnb, that state being Sabah, in East Malaysia. Despite this ban, there are currently more than 1500 listings in the state capital of Kota Kinabalu.

Kuala Lumpur City Hall or Dewan Bandaraya Kuala Lumpur (DBKL) has started a registration program for individuals, agents or companies involved in short-term rental stays. DBKL has said that program is being carried out so that the Companies Commission of Malaysia (SSM) can conduct studies on operators of Airbnb rentals.

It is expected that by making such a move that they could be planning certain forms of regulation and taxation in the near future.

It looks very unlikely that the government will flip flop on their stance at the moment as the platform might have had a part to play in the rise of the number of tourists in Malaysia which rose 231% from 2015 to 2016.

An estimated 638,000 travellers to Malaysia in 2016 used Airbnb for their holiday lodging and this number is likely to have increased since 2016 along with the number of Airbnb listings in the country which have more than doubled since then.

So, the Airbnb business is legal and it’s well adopted in Malaysia. What about the returns though? Are they really that impressive?

As with all property investments, the most important factor is the location. Airbnb rental income can vary drastically depending on the location of the unit and not all areas perform as well as others. To find out which locations perform the best you can search for listings on Airbnb.com or you can use Airdna.co. We’ve found that Airdna provides some pretty amazing in-depth data on many popular locations and presents the information in a very easy to read format.

Let’s look at how the different popular Airbnb locations in Malaysia perform against each other and if they could be viable solutions for your next new investment property.

Airbnb Kuala Lumpur

Airbnb Kuala Lumpur

First, let’s look at the most popular Airbnb location in Malaysia – Kuala Lumpur. Based on 2582 listings in the area, the average daily room rate is roughly RM280. On average, for the month of January, the listings have a 61% occupancy rate and average monthly revenue of about about RM4264. These are some pretty stellar earnings considering what you would get if you were trying to rent out your regular 2-bedroom apartment.

How does this compare with the cost of new property in the area though?

Prices of new residential developments in KL city center can be upwards of RM1700 psf. So, this would mean that an 850 sqft unit (we use 850 sqft as a base as this would be your typical size for a 2-bedroom unit which is the most popular unit size for Airbnbs in Kuala Lumpur City Center according to Airdna) would cost you about RM1,445,000. At 4.4% interest for 30 years, your repayments would be about RM6512 per month which is significantly short of the average monthly revenue. This works out to a miserable 3.5% rental yield.

Not really ideal if you’re looking to get in on some of the upcoming developments in the area but then again, everything here is unhealthily expensive.

Airbnb PenangAirbnb Penang

Next up, let’s look at Airbnbs in Georgetown, Penang. There are currently 1567 active rentals in the area with an average daily room rate of RM324. The average occupancy is 70% and the average monthly revenue is RM5536. Talk about big numbers!

How does this compare with the cost of new property in the area though?

Prices in Georgetown for new residential developments can go for about RM1500 psf. Taking the average size of a 2-bedroom apartment to be about 850 sqft once again, means that a unit of this size would cost you about RM1,275,000. At 4.4% interest for 30 years, your repayments would be about RM5746 per month which is just about matched by the monthly revenue. This works out to be a mediocre 5.2% rental yield.

There might be some interesting opportunities here for smaller units if you can get close to RM300 a night for a 1-bedroom unit.

 

Airbnb Melaka

Airbnb Melaka

Moving on to Airbnbs in Melaka (Malacca), you can see that based on 1350 active rentals in the area, the average daily room rate is RM336. The average occupancy is 43% and the average monthly revenue is RM4240.

How does this compare with the cost of new property in the area though?

Prices in Melaka for new residential developments can go for about RM500 psf. So, because the most popular rooms here are at least 3 bedrooms, this would mean that a 1265 sqft unit would cost you about RM632,500. At 4.4% interest for 30 years, your repayments would be about RM2850 per month which is easily covered by the monthly revenue. This works out to be an amazing 8.0% rental yield.

Who would’ve thought that Airbnb’s in Melaka were doing so well. (I certainly had no Idea) Might be a place worth looking into. There are some nice new projects in the works too.

Airbnb Ipoh

airbnb ipoh

Looking next at Airbnbs in Ipoh, it shows that based on 1007 active rentals, the average daily room rate is RM304. The average occupancy is 43% and the average monthly revenue is RM3916.

How does this compare with the cost of new property in the area though?

Prices in Ipoh for new residential developments go for about RM400 psf. The most popular rooms here are 3 bedroom units, so a 3-bedroom unit at 1265 sqft would cost about RM506,000. At 4.4% interest for 30 years, your repayments would be about RM2280 per month which makes it a pretty awesome investment. This works out to be a phenomenal 9.3% rental yield.

This was one that really had me confused – I had absolutely no idea Airbnbs in Ipoh were doing so well. If you’d asked me before I looked into this, I’d have never thought about Ipoh at all. Considering how cheap units are here, it’s definitely something i’d like to look into further. I think you should too.

Airbnb Johor

airbnb johor

The last place we’re going to look at are Airbnbs in Johor Bahru. It shows that based on 1623 active listings the daily room rate is RM252. The average occupancy is 45% and the average monthly revenue is RM3164.

How does this compare with the cost of new property in the area though?

Prices in Johor Bahru, near the city center, for new residential developments can go for about RM850 psf. Since 2 and 3-bedroom units are almost equally as common, it would make more sense to use a 2-bedroom for our calculations here. So, taking the average size of a 3-bedroom unit to be 850 sqft, it would cost you about RM722,500. At 4.4% interest for 30 years, your repayments would be about RM3256 per month which is just about what you can expect in monthly revenue with a slight shortfall. This works out to be a mediocre 5.2% rental yield.

Johor looks to be doing fairly well, but new developments might not quite be worth your while. Perhaps there are some good deals to be found but it will require a bit more investigation.

Let’s see how all the areas ranked up against each other.

Location

Average Daily Room Rate (RM) Average Occupancy (%) Average Monthly Revenue (RM) Average Unit Size Rental Yield

Positive Cash-flow

Kuala Lumpur City Center

280 61 4264 2-BR 3.5%

No

Georgetown, Penang

324 70 5536 2-BR 5.2%

No

Malacca

336 43 4240 3-BR 8.0%

Yes

Ipoh

304 43 3916 3-BR 9.3%

Yes

Johor Bahru

252 45 3164 2-BR 5.2%

No

 

After tabulating the findings it’s quite apparent that Ipoh and Malacca come out far ahead of the more developed cities. The true benefactors of Airbnb are those property investors who bought their units more than 5 years ago. Imagine having loan repayments that are less than RM2000 and being able to get almost RM4000 a month on your unit with ease.

The best time to buy property always seems to be yesterday.

The swell in property prices in new developments has made using Airbnb only a solution that will just barely help you cover your loan repayments in places like Kuala Lumpur, Penang and Johor. (With the exception of Ipoh and Melaka!) Perhaps there are some interesting investment opportunities to be found in these places.

But before you jump on a plane and catch the next flight to Ipoh or Malacca in search of your next investment property, there are some things to bear in mind before you do.

It’s important to note that in this comparison, only new developments were compared. The new development figures were also based on specific developments and psf rates may be more or less, depending on the specific development’s exact location.  Certain areas within these locations will also  perform better than others (if they are near tourist attractions for example, you might expect higher occupancy and higher rates), so units need to be evaluated from their exact location rather than taking the area as a whole.

It should also be noted that this data shown here is only the month of January. Seasonal fluctuations of price and occupancy have not been taken into consideration. Ironing out all the creases to make a stronger case for a green light, will require more data and further investigation.

Airdna provides a wealth more of information through their paid version of Market Minder which are locked and not visible above. If you’re an investor looking to use Airbnb to supplement your rental income, I highly recommend you check it out. They charge RM120/month for a full 18 months of data on each specific area which is more than worth your while if you’re looking to make a few hundred-thousand-dollar decision on where to purchase your next investment property.

Check them out through our affiliate link here – Airdna.co. They offer a 7-day money back guarantee so if you’re not happy with your purchase, feel free to get a no questions asked refund from them.

Airbnb has definitely changed the face of property investing in Malaysia and allowed property investors across the country to turn negative cash flow investments into positive ones.

It’s not hard to see why investors love Airbnb and are making full use of the globally growing sharing economy to maximize their gains.  Looking at Airbnb in Malaysia: From a Property Investors point of view, it’s hard to say that Airbnb has done anything short of revolutionising rental income for millions of Malaysians.

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