Short-Term vs Long-Term Rentals: Market Size and Growth

Malaysia's rental market operates in two distinct segments that increasingly overlap: short-term rentals (typically through platforms like Airbnb and Booking.com) and long-term residential tenancies (12-month leases and above). Each segment has different economics, regulations, and risk profiles. Tourism Malaysia recorded 27.2 million international tourist arrivals in 2024, fuelling short-term rental demand, while DOSM reported 1.8 million renter households in the 2024 Household Income Survey. This analysis compares both segments to help landlords decide where to allocate their properties.

Market Size: The Numbers

Short-Term Rentals

AirDNA, a short-term rental analytics platform, estimated that Malaysia had approximately 85,000 active short-term rental listings as of Q4 2024. The market generated an estimated RM4.2 billion in gross booking revenue in 2024, up 18% from 2023.

Key metrics:

• Average daily rate (ADR): RM280 for entire home listings in KL (AirDNA, 2024)
• Average occupancy rate: 58% nationally, 72% in KL city centre
• Average annual revenue per listing: RM49,400 (active listings in top markets)

Long-Term Rentals

The long-term rental market is significantly larger by volume. JPPH's Residential Property Stock Report (2024) estimates approximately 1.2 million units in Malaysia's formal rental market, generating an estimated RM18-22 billion in annual rental income.

Key metrics:

• Average monthly rent (nationwide): RM1,100 for apartments, RM1,800 for terrace houses (iProperty.com.my, Q4 2024)
• Average vacancy rate: 18% nationally, 8-12% in high-demand urban areas
• Average annual revenue per unit: RM13,200-21,600

Revenue Comparison

The revenue comparison is not as straightforward as it appears:

Factor	Short-Term Rental	Long-Term Rental
Gross annual revenue (KL condo)	RM35,000-60,000	RM18,000-30,000
Occupancy dependency	High (revenue varies with occupancy)	Low (fixed rent regardless of usage)
Operating costs	30-45% of revenue	10-15% of revenue
Net annual income	RM19,000-33,000	RM15,300-25,500
Management effort	High (guest turnover, cleaning, communication)	Low (monthly rent collection, occasional maintenance)
Seasonal variation	Significant (peak seasons vs low seasons)	Minimal

The gross revenue advantage of short-term rentals narrows significantly when you account for higher operating costs: professional cleaning between guests (RM80-150 per turnover), platform commissions (3-15% depending on the platform), higher utility consumption, furnishing maintenance, and the time cost of managing guest communications.

Regulatory Environment

Short-Term Rental Regulations

Malaysia's regulatory approach to short-term rentals remains fragmented:

• No national legislation: There is no federal law specifically governing short-term rental platforms. Regulation falls to state governments and local authorities.
• Strata by-laws: Many condominium management corporations have passed by-laws restricting or prohibiting short-term rentals. The Strata Management Act 2013 empowers Joint Management Bodies (JMBs) and Management Corporations (MCs) to set rules regarding property use.
• Local council licences: Some local councils require operators to obtain a premises licence. Kuala Lumpur City Hall (DBKL) has been discussing a registration framework since 2023, though implementation details remain pending.
• Tourism tax: Short-term rental operators are required to collect and remit the RM10 per room per night tourism tax (Tourism Tax Act 2017), though enforcement on small operators has been inconsistent.

The regulatory trend is toward more oversight, not less. Operators who establish compliant practices now will be better positioned as regulations formalize.

Long-Term Rental Regulations

Long-term tenancies are governed by contract law (the tenancy agreement), the Contracts Act 1950, and various supporting legislation. While Malaysia lacks a full landlord-tenant act, the framework is well-understood and stable. The Tribunal for Consumer Claims handles disputes up to RM50,000.

Risk Profile Comparison

Short-Term Rental Risks

• Demand volatility: Tourism is sensitive to economic conditions, health crises (as demonstrated during COVID-19), and geopolitical events. Short-term rental income can drop 50-80% during crises.
• Regulatory risk: New restrictions or bans could be implemented with limited notice.
• Property damage: Higher guest turnover means higher risk of property damage. AirDNA reports that 3-5% of stays result in some form of damage claim.
• Neighbour complaints: Noise, parking, and common area usage complaints from permanent residents can lead to strata by-law amendments that restrict your operation.

Long-Term Rental Risks

• Tenant quality: A problematic long-term tenant can cause significant financial damage over months before legal remedies take effect.
• Vacancy periods: Finding a new tenant takes 2-6 weeks on average in urban Malaysia. Each vacant month is a full month of lost income.
• Market rate decline: In oversupplied markets, rents can stagnate or decline, and your locked-in lease prevents you from adjusting.
• Maintenance responsibility: Structural and major appliance maintenance falls on the landlord, with costs that can be significant.

Which Strategy Suits Which Property?

Properties Best Suited for Short-Term Rental

• Located in tourist hotspots (KLCC, George Town, Langkawi, Malacca)
• High-floor condos with city views or sea views
• Near convention centres or business event venues
• Unique or distinctive properties (heritage homes, designer units)
• Properties in buildings where strata by-laws permit short-term rental

Properties Best Suited for Long-Term Rental

• Located near employment centres, universities, or transport hubs
• In residential-focused buildings with families and long-term residents
• Properties in buildings where strata by-laws restrict short-term rental
• Landed properties in suburban areas
• Properties where the landlord wants minimal management involvement

Chong Kok Yew, director of residential services at Savills Malaysia, stated in a 2024 PropertyGuru Market Outlook interview: "The sweet spot for most Malaysian property investors is a long-term tenancy as the base strategy with the option to pivot to short-term during peak tourism periods. This hybrid approach provides income stability while capturing seasonal upside."

The Hybrid Model

Some landlords operate a hybrid approach:

• Lease long-term for 10 months of the year
• List on short-term platforms during peak tourism months (December-January, Chinese New Year, school holidays)
• Achieve higher total annual revenue than either strategy alone

This requires a tenancy agreement that permits such flexibility (most standard agreements do not) and operational readiness to switch between modes.

For landlords managing long-term tenancies, platforms like EzLease handle the administrative foundation: tenant verification, agreement management, payment tracking, and maintenance coordination. This operational efficiency is what makes a long-term rental strategy sustainable, especially when managing multiple properties.

Frequently Asked Questions

Is short-term rental more profitable than long-term rental in Malaysia?

In high-demand tourist areas with consistent occupancy above 65%, short-term rental generates higher gross revenue. However, after accounting for operating costs (30-45% of revenue), the net income advantage is smaller. In suburban or non-tourist areas, long-term rental is almost always more profitable.

Do I need a licence to operate a short-term rental in Malaysia?

Currently, there is no national licensing requirement, but some local councils require premises licences. You must comply with your condominium's strata by-laws (which may restrict short-term rental) and collect tourism tax of RM10 per room per night. Regulations are evolving, so check current requirements for your specific location.

What occupancy rate do I need for short-term rental to beat long-term rental?

As a general rule, you need sustained occupancy above 55-60% for short-term rental to match the net income of a long-term tenancy on the same property. Above 70% occupancy, short-term typically generates significantly higher net income.

Can my condominium JMB/MC ban short-term rentals?

Yes. Under the Strata Management Act 2013, the management corporation can pass by-laws regulating property usage through a special resolution at a general meeting. Many condominiums in KL and Penang have implemented such restrictions. Check with your building's management office before listing on short-term platforms.

Key Takeaways

• Malaysia's short-term rental market generated approximately RM4.2 billion in 2024, while the long-term market generates an estimated RM18-22 billion annually.
• Short-term rentals offer higher gross revenue but come with 30-45% operating costs, compared to 10-15% for long-term rentals.
• Regulatory risk for short-term rentals is increasing, with strata by-laws and local council requirements becoming more common.
• Long-term rentals provide income stability, lower management effort, and lower regulatory risk.
• The property's location, building regulations, and your personal management capacity should drive the choice between short-term and long-term strategies.