SINGAPORE – Two leasehold sites in Upper Thomson Road and Zion Road have been launched to pilot a new class of long-stay serviced apartments – which come with a three-month minimum stay period – in a bid to meet rising private housing rental demand.
Zion Road Parcel A and Upper Thomson Road Parcel A, which can yield a combined 535 long-stay serviced apartments, are among three sites launched for sale under the second-half 2023 Government Land Sales (GLS) confirmed list on Dec 4.
Together with Upper Thomson Road Parcel B, the three confirmed list sites can yield a total of 2,750 units including long-stay serviced apartments, said the Urban Redevelopment Authority.
Ms Wong Siew Ying, head of research and content at real estate firm PropNex, said the new class of serviced apartments may attract developers with hospitality experience.
“Developers looking to generate additional cash flow via the leasing model may be keen. These serviced apartments could be run at lower operating costs, including staffing and administrative expenses, compared with a typical hotel,” she said.
Mr Eugene Lim, key executive officer at real estate firm ERA Singapore, said serviced apartments cater to those who prefer housekeeping services and en-suite amenities that condominium rentals do not provide.
Having a portion of the project allocated for serviced apartments may help reduce development risks – as developers have fewer residential units to sell within the stipulated five-year timeline for remission of additional buyer’s stamp duty (ABSD), Ms Wong added.
To qualify for remission – the current rate is 35 per cent – developers have to complete and sell all residential units of a development within five years. Otherwise, they will have to fork out the hefty ABSD plus interest.
Mr Lee Sze Teck, senior director of data analytics at property firm Huttons, noted that the sites may appeal to certain developers seeking to divest serviced apartments to their Reits (real estate investment trusts).
“As the serviced apartments cannot be strata subdivided for sale, it means they are held under one strata title and are sold as one. Some developers with a hospitality arm may see this as an opportunity to increase the number of rooms under management. They can choose to either manage the serviced apartments for recurrent income, or divest to a Reit to recycle their capital,” he said.
A fourth site, Zion Road Parcel B, is available for application under the reserve list with a potential yield of 610 residential units. Reserve list sites are put up for tender only when a developer has indicated a minimum price that is accepted by the Government.
In all, the four leasehold sites in Zion Road and Upper Thomson Road, located near Havelock and Springleaf MRT stations, respectively, can yield a combined total of 3,360 units.
Analysts said serviced apartments at the Zion Road site will likely attract working professionals on a short-term contract and medical tourists as it is near Singapore General Hospital, one-north and the National University of Singapore.
Dr Tan Tee Khoon, country manager at PropertyGuru Singapore, believes that the Government is trying to pre-empt a situation where a future pandemic again “curtails housing supply when completions are delayed, and runaway rents make a comeback”.
Should the pilot prove successful, more sites may be released for a “build-to-rent” model, he added.
Zion Road Parcel A is deemed the most attractive site as it is near Orchard Road and the city centre, analysts said, adding that developers may be cautious about the two Upper Thomson Road plots, given the large supply of new private homes in the nearby Lentor Hills area.
Nevertheless, Ms Wong from PropNex predicts that the Zion Road site – which can yield 1,170 units including 435 serviced apartments – may draw only two or three bids due to its size and large price quantum, with the top bid coming in at around $1.47 billion to $1.66 billion (a land rate of $1,600 per sq ft per plot ratio to $1,800 psf ppr).
The last GLS site sold in the area is one in Jiak Kim Street where the 455-unit Riviere condo now sits. It attracted 10 bids and was awarded for $955.4 million ($1,733 psf ppr) in December 2017.
Meanwhile, for Upper Thomson Road Parcels A and B, successful bidders will be required to incorporate biodiversity-sensitive urban design strategies in their proposed developments, as these plots are near the Central Catchment Nature Reserve.
Analysts say Upper Thomson Road Parcel A, which can yield 640 units including 100 serviced apartments, may be more attractive as it will be part of an integrated development with Springleaf MRT station and is the smaller of the two plots, which could mean lower development risks.
On the other hand, developers may bid more conservatively for Upper Thomson Road Parcel B, which can yield 940 residential units, because the successful bidder would need to integrate the conserved building of the former Seletar Institute with the future project to preserve the heritage of the area, Ms Wong said.
“Such integration works may potentially push up development costs,” she pointed out.
The tenders for Zion Road Parcel A and Upper Thomson Road Parcel B will close at noon on April 4, 2024. The tender for Upper Thomson Road Parcel A will close on June 19, 2024.
