Prague: the next generation of Airbnb

Post date: May 17, 2016 7:6:30 PM

Prague: the next generation of Airbnb 

You have probably heard that as of May 2016 a newregulation has come into effect that prohibits the residents of Berlin from renting apartments to tourists via various internet services such as 9Flats, Wimdu, and the well known Airbnb. What does this actually mean and what does it have to do with the Czech Republic?

To answer this question you must understand what Airbnb is

Airbnb is an internet site established in 2008 in order to connect people interested in renting holiday units or small residential units for a short period of time with the owners of such units, usually private individuals (as opposed to hotel chains or real estate companies). Airbnb is currently worth over 20 Billion dollars and is not the only company offering this service. Providing holiday units is a significant market that contains its own niche services such as family trips ( or pampering holiday apartments ( Until recently, the company focused on the needs of Millennials who view sharing as a social value. However, the main reason the company has taken off and attracted people who have chosen its services over the traditional hotel venues is the price which, while dependent on the destination, is still on the average roughly half that of the rates offered in hotels. And this is where you enter the picture- purchasing an apartment for investment purposes aimed at targeting this short rent, high daily fee, market has become an increasingly attractive option. Apartment owners have understood that they can make much more money if they do not rent their apartment to a single long term tenant but to a rapid sequence of short term, and higher paying tenants.

As expected, the hotel owners have cried unfair competition and demand that Airbnb be restricted and they have been joined by fair housing costs activists. The latter claim that the supply of apartments is limited and that restricting it further leads to a rise in rent prices.

Be that as it may, Airbnb faces many regulatory obstacles in some countries. So if you wish to know what is permitted and where you are invited to join us in a swift tour around the world.

London- research in London shows that some 40% of the alternate holiday units for rent are actually “Pseudo- Hotels” operated by professional real estate companies. Accordingly, a law was passed in earl February to limit the period of short term lease for each and every apartment to 3 months a year. The Association of British Hoteliers has raised three proposals to regulating this issue: The first is to require alternate holiday unit sites to share with governmental bodies’ information indicating which unit owners rent out their apartments for more than 90 nights a year in London. The second is to require them to provide information indicating how many people are renting apartments for more than 90 nights in London and what tax should be paid against this income. The third is to provide information regarding the number of people who are being employed and draw salaries in the context of these services.

The United States- in many cities across the United States of America an argument rages regarding the restrictions on the market for short term apartments for rent. In New- York, the lease of apartments for a period shorter than one month has been prohibited (though this prohibition has been overturned by a court decision on September 2015). On the other hand, in San Francisco the law sets an upper limit of 90 days on leasing an apartment via Airbnb. There are currently (May 2016) two legislative proposals pending in San Francisco. The more severe of the two asks to limit the lease duration to 60 days a year and to levy severe financial penalties on those who violate this limitation, a limitation that is supposed to prevent apartment owners from converting their apartments into hotels. Furthermore, rentiers will be required to register as sub letters in the municipal board of planning, pay an Hotelier tax of 14% on any income derived and be obligated to pay an apartment insurance.

Barcelona- In Barcelona the law requires registration of the apartment in city hall and forbids the renting of rooms in private apartments. Those violating the law face a stiff fine of 30 thousand Euros.

Singapore- Forbidden, Forbidden, Forbidden.

Berlin- As of May 2016, the new regulation has come into effect that forbids the residents of Berlin from renting their apartments to tourists. Those violating this prohibition face a fine of up to 100 thousand Euros for apartment. Nonetheless, Apartment owners and subletting tenants may continue to rent rooms in their apartments to tourists, provided they are permanent residents in them. A new law passed in Berlin renders the use of Airbnb illegal- unless one is prepared to undergo a bureaucratic process and pay a commission of hundreds of Euros in order to receive a special permit. In parallel, an anonymous snitching hotline has been opened to report residents who violate the new laws and restrictions.

And what about Israel? The Israeli Hotelier’s association also believes that those operating holiday units for the benefits of tourists are effectively, and unfairly, exempt of the enforcement of various laws and regulations such as: the zoning and construction law, the business licensing and taxation laws, property tax, income tax and real estate tax. However, so far no comprehensive action has been taken to regulate short term renting of private apartments. Given all of the above as investors you are no doubt asking yourselves- where is it still possible to purchase apartments for the purposes of short term leases?

Have you heard of Prague? Here use of Airbnb is encouraged by the authorities! 

Prague is rated 10th in Europe in terms of tourists. Over 10 million tourists a year arrive at the capital of the Czech Republic every year of which 300,000 are Israelis who are only 3.5 hours of flight from home. The number of tourists in Prague shows an increase of a number of percentage points each year. More importantly, thenumber of tourists who use services such as Airbnb rises by a number ofpercentage points each month. The average stay of each tourist in the city of Prague is, by the way, roughly 4 nights. Due to Prague’s great dependence on tourism, all issues related to this field undergo rapid adaptation and therefore matters here are far more regulated and organized.

How can one legally rent apartments to tourists in Prague as matters currently stand? 

First of all, you must own an apartment suitable for tourists to use. You can easily purchase such an apartment even if you are not residents of the Czech republic and even receive a mortgage for Czech banks for the property. Once the property is transferred to your name in the Czech Republic Registrar, all you must do is register in the municipal city hall, or even online, in a rapid and swift procedure and receive a unique property code. It is well worth noting that every district of the city has a unique registration form and so it is worthwhile examining the local ordinances for each district (the above relates to district 1).

The renter is obligated to manage a guest register containing the following details:

The guest register must be retained for surveillance purposes for up to 6 years. It should be noted that some guests are exempt of registration and associated payments including guests under the age of 18 or above the age of 70, blind guests and guests with disabilities.

What are these fees? Once a month it is necessary to pay a fee of 15 Czech Koruna’s for night but it is possible to send the payment via the site together with the code you received upon registration. Alternatively, it may be paid via the postal service. At the time of the monthly payment a summary outlining the period of rent, the number of beds rented, the total number of days rented and the total sum received from the tenant.

Alternatively, and this is even more highly recommended for overseas investors, you can make use of the services of property management companies which specialize in the short term lease of properties. They will perform almost all tasks related to the property for you and charge between 20% to 30% of the profits for their services.

Read here about the currently most attractive Prague neighborhoods here.