A NEW class of serviced apartments with a longer minimum-stay requirement – at least three months – will soon be rolled out to “better meet rental demand”, Minister for National Development Desmond Lee said on Wednesday (Nov 29). 

The government will pilot the new category in two state land sites coming up for sale in early December under the Government Land Sales (GLS) programme’s confirmed list for private residential housing for the second half of this year. At these sites in Upper Thomson Road and Zion Road, a proportion of the gross floor area will be set aside for long-stay serviced apartments, with a total potential yield of about 535 units, said Lee. 

Like existing serviced apartments which have a seven-day minimum stay, the new long-stay serviced apartments cannot be strata subdivided for sale.  

The pilot will enable the government to gauge market demand before it does a study on whether this category can be offered more widely, Lee said. 

Speaking at the Real Estate Developers’ Association of Singapore’s 64th anniversary dinner, he noted a diversity in Singaporeans’ housing preferences. “While the vast majority of Singaporeans still aspire to own their own homes, some have shared with us that they are open to renting.” 

It is therefore crucial to maintain a “healthy rental supply” for those who need to rent, such as those waiting to collect the keys to their new homes, as well as those who are in Singapore to work or study, he said. 

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The new class of serviced apartments will cater to those seeking longer-term stays, since they will no longer have to compete with potential tenants of the shorter-stay ones, which include tourists and business travellers, added Lee. 

Taking these renters out of the residential market could also help curb the asking rents of private landlords, market watchers reckoned.

Desmond Sim, Edmund Tie’s chief executive officer, said that people will have more avenues to rent, with these long-stay serviced apartments being an alternative rental source, and if demand remains constant, that will help ease the demand-supply imbalance.

Huttons senior director of data analytics Lee Sze Teck added that such serviced apartments will address a gap in the market, since most landlords in the rental market – whether for private or public housing – prefer a two-year lease.

“This may (also) change the business model for developers looking to build and sell,” he said. “They will have to either manage the serviced apartments, or work with an operator. However, there might not be any impact on the top bid for the GLS sites.”

Sim noted that the pilot sites at the next GLS exercise may not be every developer’s cup of tea. “Running a serviced apartment is very different (from residential properties),” he said. “You need the proper staff… and will have continued operational expenses, even though you will also get recurring income.”

Property players with little to no experience in the hospitality industry may take this as an opportunity to venture into something new, he said, but added that the more experienced developers are more likely to give it a go.

Residential rents in Singapore have soared in the past two years amid tight supply and strong demand. But analysts noted that the market has finally eased, with signs of stabilisation in demand and lower asking prices. 

Flash estimates from SRX and 99.co showed that rents in the private market were down by 0.2 per cent in October. Rents for public housing, meanwhile, dipped 0.4 per cent in their first decline since 2021.

Data from the Urban Redevelopment Authority showed that rental growth in the private residential market had slowed in the third quarter of 2023 to 0.8 per cent, from the 2.8 per cent increase in the previous quarter. 

This came as the number of completed private homes hit a peak of 9,013, the highest quarterly supply completion since Q2 2016. Cumulatively, the number of completed units for the first three quarters of 2023 was 17,199 – three times that of the same period last year. 

A total of around 20,400 private homes are expected to be completed for the whole of this year, the highest annual supply completion since 2017, said URA. 

A market report by OrangeTee and Tie indicated that the private rental market entered a “clear slowdown” in the second half of 2023. This is primarily due to a boost in supply of around 28,600 new private homes, excluding executive condos, together with a dip in domestic demand as “many locals exited the leasing market after moving into their new homes”, said Christine Sun, the consultancy’s senior vice-president of research and analytics. 

She expects further downward pressure on rents as domestic demand continues to shrink. Rental growth is predicted to range between 12 and 14 per cent for the year, and dip lower in 2024 to 2 to 5 per cent, she said. Rents rose 29.7 per cent in 2022. 

Beyond 2023, OrangeTee and Tie data shows a fall in supply. Excluding ECs, private residential completions are expected to decline from 19,050 units in 2023 to 9,875 units in 2024. They will then fall further to 6,028 units in 2025 and to 5,154 units in 2026.