Yiannas Misirlis: AirBnB and real-estate. Discussion during the recent Economist forum in London
Imperio’s Founding Director, Yiannis Misirlis, was a keynote speaker at the recent Economist forum (“Cyprus – Greece – Israel: Strengthening ties”) in London. Mr Misirlis devoted part of his speech on the surge of short-term rentals and their impact on both real-estate and on society. More specifically, in his opening remarks, Mr Misirlis characterised the short-term rentals as a emerging trend directly related to the hospitality sector. “The innovation of AirBnB is a disruptive force; it’s challenging the world of hospitality while at the same time, it’s creating a huge demand for properties”, Mr Misirlis said.
Many individuals saw the AirBnB short-term rentals as an opportunity to commercialise their private properties, Mr Misirlis said, as in recent years many residential properties were acquired and then converted into short-term rentals, yielding significantly higher return on investment in comparison to long-term rental properties.
Asked whether AirBnB is an opportunity or a threat to society, the founder of luxury developer Imperio replied: “Short-term rental is not just a trend that will pass. We may or may not like it, we may love or hate it, but we certainly cannot ignore it. It could operate either through AirBnB or Booking.com or any other platform; it doesn’t matter. If there is a need for short-term rentals, it doesn’t matter through which platform they are made available; the market will find a way to provide them. Therefore, we cannot ignore this. Instead, we need to be 100% sure that this is done via the right channels and that it is 100% legal (and taxable, of course).
I know that this form of rental is not desirable by many in the hospitality industry (because it affects their bottom line), but this is precisely the reason why it is characterised as a disruptive force. I know that short-term leasing drives long-term rentals to higher price levels (because it reduces the supply of long-term rental properties), and this will continue to happen until the market responds by providing more supply of properties for long-term leasing.
The above market dynamic is exactly one of the main reasons causing the significant increase in rents in growing cities like Limassol. Of course, to the above, we should add the significant increase in demand for student accommodation, the restricted property supply (because of limited construction activity) in the last 5 years (especially between 2012 and 2015), the existence (and abuse, to some extent) of the outdated Tenancy Law for Rent Control, etc., but short-term leasing is the main reason”.
Mr Misirlis was also asked by the attendees of the forum whether a wider rent control in the Limassol market (other than the properties falling within the Tenancy Law) would be a reliable measure to address the problem of increasing rents. He replied: “There is so much talk about rent levels in Limassol today, but rent controls are meaningless if Limassolians can’t find a property to live in because there simply aren’t enough suitable properties available. Rent controls typically lead to a drop in investment, since no investor would want to invest in properties which have already reached the peak of their return. Increasing supply should be the Authorities’ priority in trying to tackle this issue”. Mr Misirlis even added: “Localised rent controls would have a huge impact on the surrounding areas. As demand (for rental properties) continues to outstrip supply, residents would have to move out of town (and away from urban centers), with suburban rentals increasing further as demand would grow (in the suburbs). Rent controls (which have been implemented in some European cities and have been demonized in several of them) do not working; it hits the hardest those designed to help the most”.
Mr Misirlis noted: “The solution to this problem is to increase the supply of suitable properties. In addition, outdated laws, such as the Tenancy Law which does everything but serving the market, need to be corrected. It is so outdated that, at the moment, it simply protects strategic bad payers. This is what drives many property owners, who would like to make their properties available for rent, to short-term lease only, where a potential non-paying tenant would not be protected by the Tenancy Law”.
Therefore, the solution on the rent issue is complex, and combines the regulation of outdated laws and the increase in the supply of suitable properties. Mr Misirlis added: “This latter must be done very strategically and very carefully so as not to lead to over-supply”.
According to Mr Misirlis, this year’s Economist forum in London has shown, for yet another year, the interest of international property investors in Cyprus, which is improving year by year.