Upcoming GLS sites at Upp Thomson Rd and Zion Rd will incorporate new class of ‘long-stay’ serviced apartments

To start the pilot, the government will set aside a portion of the GFA at two upcoming GLS sites – at Upper Thomson Road and Zion Road (pictured) – for this long-stay serviced apartments.

The government will introduce a new class of serviced apartment to meet the diverse housing preferences of Singaporeans, especially those who are increasingly inclined towards renting. Minister for National Development, Desmond Lee, announced this pilot at the Real Estate Developers’ Association of Singapore’s (Redas) 64th Anniversary Dinner on Nov 29.

“While the vast majority of Singaporeans still aspire to own their own homes, some have shared with us that they are open to renting,” says Lee. He adds that these tenants include those waiting to collect the keys to their new homes, or waiting for renovations to be completed, and others are moving to Singapore for work or study.

It is the reality faced by some homebuyers who have already sold their property but are waiting to move into their new home, says Eugene Lim, key executive office at ERA Realty. “These buyers often find it difficult to rent on the open market as most landlords today want to secure a two-year lease”.

This new class of serviced apartment will have a three-month minimum stay requirement. Under prevailing URA regulations, serviced apartments are allowed in non-landed residential sites but have a seven-day minimum stay requirement. The long-stay serviced apartments introduced by the government would be in line with the minimum stay requirement of private residential properties, which must be rented out for at least three consecutive months.

“Serviced apartments today can cater to those who wish to stay for longer durations. But their seven-day minimum stay requirement means potential tenants – both Singaporeans and foreigners – must compete with those in Singapore for short stays, including tourists and business travellers,” says Lee.

To start the pilot, the government will set aside a portion of the Gross Floor Area (GFA) at two upcoming Government Land Sales (GLS) sites – at Upper Thomson Road and Zion Road – for this long-stay serviced apartments. This could yield approximately 535 units of these new class of serviced apartments.

According to URA, the new long-stay serviced apartments cannot be strata subdivided for sale. “This means that it might be possible for developers to hold onto the units for recurring rental revenue,” says Lim.

Both GLS sites were announced under the Confirmed List of the 2H2023 GLS programme and will be launched next month. The Upper Thomson Road GLS site is next to Springleaf MRT station on the Thomson-East Coast Line (TEL), while the Zion Road GLS site will be connected to Havelock MRT station on the TEL.

“If this new class of serviced apartment can be implemented more widely it would help soften the current rental market,” says Mark Yip, CEO of Huttons Asia. “Today, serviced apartments mainly cater to affluent residents, tourists, and professionals working in Singapore and the cost can be exorbitant for long-stays in these properties,” he says.

He adds that many Singaporeans often face a dilemma especially if they are waiting to collect the keys to their new home or waiting for renovations to be completed. “This group often have no choice but to turn to the private rental market. This new class of serviced apartment could offer them an alternative,” says Yip.

His sentiment was echoed by Eddie Lim, chief agency officer at PropNex Realty. “It is a good initiative by the government to inject badly needed rental supply into the market to give people more alternatives,” he says, adding that the dynamics of the rental market so far this year have favoured landlords and emboldened them to set asking rents relatively high with little room for negotiation.

“I think the government would like to see more variety in the types of housing options available in Singapore. Other mature housing markets around the world have multifamily housing developments that allow developers to hold on to rental properties for a longer period, instead of being forced to sell all of the units within five years,” says Koon Wai Leong, general manager of Hoi Hup Realty.

He also hopes the government will release more details on the pilot, addressing questions such as how many percent of a site's GFA will be allocated to serviced apartments, their unit size restrictions, and how the ABSD will factor into this portion of the projects' GFA. “We need to wait for more details from the government on the relevant tender conditions,” says Koon.

The government may also have chosen the Upper Thomson Road GLS site and the Zion Road GLS site to test how different types of locations influence the success of this new class of service apartments, says Koon. “They may want to see if the serviced apartment component in the Zion Road GLS site caters better towards foreigners, whereas the Upper Thomson GLS site might resonate better as alternative rental options for locals,” he says.

“We might see more established developers, especially those with a hospitality arm, participate in the tender of these GLS sites given their experience in operating serviced apartments. But on the other hand, smaller boutique developers might find a hospitality-focused partner to leverage on their expertise,” says Yip.