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Singapore’s new long-term serviced apartments

July 9, 2024 / By  

The Singapore government’s progressive approach to meet the housing needs of its residents has led to the introduction of a new category: Serviced Apartments II (SA2), or long-stay Serviced Apartments. This pioneering housing model is designed to fill the gap between short-term rentals like traditional serviced apartments and hotel stays, and long-term traditional rental housing, providing investors with a unique investment opportunity. Top of Form

Unpacking the Potential

SA2 stands out with its minimum three-month stay requirement, offering tenants the benefits of a serviced apartment without the long-term commitment of traditional leases. This caters to the growing demand for longer-term stays in Singapore for work or personal reasons.

Unlike transient short-term rentals, SA2 fosters a more stable and settled tenant base, enabling it to be permitted in a broader range of locations than conventional serviced apartments, thereby enhancing the investment’s reliability.

Customisation and Adaptability

Developers of SA2 are granted the flexibility to experiment with unit sizes and layouts to meet varying tenant needs. While conventional serviced apartments must be self-contained with at least 35 sq m, SA2 units only need to maintain an average of 35 sq m. With flexible unit sizes, SA2 allows a broader range of unit configurations, provided each includes an ensuite bathroom.

Table 1: Types of leased accommodations in Singapore (private residential)

Source: LTA, URA, JLL Research

Strategic Benefits for Investors

SA2 meets a critical market gap by catering to long-stay tenants who prefer not to commit to traditional long leases, offering several advantages:

  1. Expanded market reach: By permitting SA2 in more locations, investors can tap into a broader tenant base, increasing occupancy rates and rental income potential.
  2. Flexibility in development: Investors can take advantage of the flexibility in unit design, tailoring properties to meet a myriad of tenant preferences while maintaining a global average unit size of 35 sq m.
  3. Diverse investment portfolio: The introduction of SA2 opens new avenues in the serviced apartment sector, allowing investors to diversify their portfolios and mitigate risks.
  4. Stable income stream: Longer-term tenants reduce turnover costs and ensure a more predictable and stable rental revenue stream.

The official launch of SA2 on 4 December 2023, with pilot projects at Upper Thomson Road, Zion Road and Media Circle, underscores the government’s commitment to this new housing form. These projects are set to integrate long-stay serviced apartments into Singapore’s housing landscape, providing new investment opportunities.

Conclusion

Singapore’s dynamic housing market continues to evolve, presenting investors with the opportunity to capitalise on the introduction of SA2. This innovative housing category not only addresses the changing market needs but also enhances the diversity and sustainability of rental housing investments.

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