In June, there was a seismic change in the short-term rental scene in Japan. Airbnb froze about 80% of Japanese home listings comprising an estimated 62,000 homes, apartments, and rooms leaving about 13,800 on the site. The move was made to ensure listings comply with the new ‘minpaku’ home-share law that took into effect on June 15. Priti Donnelly throws more light on the impact of the new rules.

As next year’s Rugby World Cup and the 2020 Tokyo Olympics draw closer, foreign investors have been capitalizing on Japan’s new “short-term” home-sharing law, intended to ease the shortage of hotel rooms. Most prefectures in Japan allow the service, other than the following — Saga, Shimane, Tottori, Toyama, Yamagata, Akita and Aomori.
But, investors lean toward larger cities for higher visitor demand.


Under home-sharing, there are two options to ownership: invest in an entire condominium building or house, or invest in a co-owned building. Under the home-sharing law, short-term leasing limits daily rentals to 180 days per year, and could be further restricted depending on the municipality and building management.
For this reason, for investors, the best method is to own a condominium building or house as short-term leasing is subject only to municipality approval. The other approach, a co-owned building, requires the permission of building management, and may be restricted to rentals of one month minimum stay in order for the building to avoid the requirement of a hotel licence.


With a potential gross income per day estimated between 2,000 to 4,000 JPY, depending on location, it’s easy to understand the growing interest in taking advantage of the relaxed rules for short-term leases. To put profits in perspective, according to gross statistical calculations, even at approximately 50% occupancy, profits would be higher than standard long-term leases. At 80% occupancy, annual average income of short-term lease properties could potentially double. Due to the cap of restricting daily rentals to only 180 days, some owners say such profit is difficult to achieve without hiking the rent and risk losing the tenant to more competitive rates.


Another consideration to the short-term venture is the cost factor, which on average could amount to approximately 250,000 JPY. To be competitive, owners would be required to provide a fully furnished and well-maintained unit, safe, clean and secure. The keypad entry code must be routinely changed. Wireless internet connection could pose a minimum monthly expense of 4,000 to 5,000 JPY. Expect utility costs of 500 JPY per day for an average 16 to 24 sqm studio or one bedroom unit, which would normally house one person.
Other costs would include advertising, management, guest placement, check-in/check-out, collection of rental payments, and general administration.


Should the time come to switch back to a standard lease, the easiest option would be to lease it furnished at a higher rental rate. This should be assessed on a case-by case basis. However, as in some locations and times of year, furnished units may be more challenging to rent out, while in other cases, it would actually be a positive differentiating factor from other, non-furnished comparable rentals. If the furnished unit option is NOT competitive, you could consider either storing the furniture at a cost, moving them to another property, selling them to a secondhand shop, or even offering your property manager a deal to take the furniture off your hands for use in other properties under their management. Also, if you decide to revert back to a standard key-based locking mechanism, expect a cost of approximately 40,000 JPY.
Traditional Japan is waking up to the sharing economy. Th short-term rental business is in its earliest phase, profitable but with limitations. With economic benefits recognized, and an increased number of property management services, today’s restrictions in the current short-term home-sharing service could prove to be the investment market of the future.

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