Singapore is now designating land for development of long-stay rental apartments, with Minister for National Development Desmond Lee announcing the first pair of sites to be sold under the new initiative in a speech on Wednesday.
Already on the Urban Redevelopment Authority’s Government Land Sales Confirmed List for the second half of 2023, the parcels at Zion Road in Bukit Merah and Upper Thomson Road in Yishun are to be launched for sale in early December, with a portion of the sites set aside for a total of 535 serviced apartments that will require a minimum stay of three months.
For Singapore, where home ownership for citizens is a longtime national priority, the policy shift aims to meet long-stay rental demand and avoid a situation where residents compete with tourists and business travellers for living space, Lee told a gathering of developers in the city-state.
“My colleagues at URA will announce the details in due course,” the minister said. “I invite you to participate in the tenders for the pilot sites, to bring new and innovative products to our rental landscape.”
Rentals Gaining Popularity
The plot along Zion Road in the central region was previously designated to provide 955 homes alongside 2,400 square metres (25,833 square feet) of commercial space, while the two adjoining parcels in the northern region’s Upper Thomson Road were intended for 1,535 homes and 2,000 square metres of commercial space.
Lee said that while the “vast majority” of Singaporeans still aspire to own their own homes, some are open to renting.
“But we also need to maintain a healthy rental supply to cater to those who need to rent, for example those waiting to collect the keys to their new homes or for their renovations to be completed, or because they are in some transition, as well as for those who are here to work, study and so on,” he said.
The long-stay serviced apartments under the pilot programme will coexist alongside shorter-stay serviced apartments with the existing seven-day minimum stay requirement. In both cases, the serviced apartments cannot be strata subdivided for sale.
Housing Market Frictions
Cooling measures and changing accommodation preferences among young people have increased the frictional costs faced by Singaporeans, permanent residents and foreign workers in the local housing market, necessitating a greater supply of flexible rental properties, said Alan Cheong, head of research and consultancy at Savills Singapore.
And while rents are expected to soften next year, they are still significantly higher than where they were at the beginning of 2022, Cheong noted. Serviced apartments offer an option for foreign workers looking to downgrade from single-unit lettings because of rising rents, he told Mingtiandi.
But the new policy is unlikely to have a material impact on the rental housing market any time soon, according to Wong Xian Yang, head of research for Singapore at Cushman & Wakefield.
“The new units may only be completed from 2028 onwards,” Wong said. “Even when completed, the estimated stock of new long-stay serviced apartments will only be about 535 units, which is about 0.2 percent of completed non-landed private residential units (333,200 units as of Q3 2023).”
Rental demand in Singapore tends to favour locations closer to commercial precincts, MRT stations and schools, he said. Developers would also have to consider potential competition from investor-bought units in the same project, since both private residential units and long-stay serviced apartments face the same three-month minimum stay restriction.