The faltering experiment with long-stay serviced apartments

This week in Property

• The lukewarm response to long-stay serviced apartments
• Meyer Blue’s sales
• HDB’s upcoming Build-To-Order exercise  
• China’s stirring housing market

Ditch long-stay serviced apartments?

To better address rental housing needs, the government introduced a new category of long-stay serviced apartments labelled SA2. 

SA2 apartments are to be rented out for lodging purposes for a minimum period of three months, unlike other serviced apartments where the minimum rental period is seven days. The minimum lease period is three months for a private home and six months for a Housing and Development Board (HDB) flat.

While three sites with SA2 components have been launched for sale this year under the Government Land Sales programme, only one site at Zion Road has been awarded to its sole bidder. Another site at Upper Thomson Road drew no bids.

Last week, the Urban Redevelopment Authority (URA) said it was not awarding the 60-year leasehold Media Circle site for the building of long-stay serviced apartments with commercial at first storey. The sole bid of S$120 million, which translates to about S$461 per square foot (psf) per plot ratio, was assessed to be too low.

In this week’s The Level Ground, I argue that it may be time to ditch the SA2 model. Ultimately, I think the tepid demand from developers for sites with SA2 components reflects uncertainty over user demand for long-stay serviced apartments.

SA2 units will presumably occupy a mid-point in pricing between pricier standard serviced apartments and cheaper private homes for broadly comparable units.

Locals and foreigners who need lodging for several months or more may prefer for cost reasons to choose a private or HDB home over an SA2 unit. Meanwhile, standard serviced apartments may better serve those who are looking for lodging for under three months, as well as those who are unsure whether they need accommodation for more or less than three months.

Meyer Blue’s take-up

While softness showed in the URA’s flash estimate on private home prices in Q3, there is demand for the right projects. 

A Meyer Road address, which conjures old-world luxury, continues to work its charm with well-heeled homebuyers. Freehold condominium Meyer Blue in District 15 sold 114 units – slightly more than half of its 226 units – over its launch weekend at an average price of S$3,260 psf. Two and three-bedroom units, sized from 667 sq ft to 1,141 sq ft, were popular with buyers. The project’s only two penthouses, which are sized at close to 3,000 sq ft each, were also sold.

Meanwhile, resale prices in the public housing market continued to climb despite a drop in September volumes, flash data from SRX and 99.co showed. HDB resale prices for September grew 1.8 per cent from August’s level, though volumes plunged 14.9 per cent.

Applicants will have a bumper crop of about 8.500 flats to choose from in this month’s HDB Build-To-Order (BTO) exercise. Around 2,085 flats with shorter waiting times of under three years will be offered across three projects in Bukit Batok and Sengkang. Almost 70 per cent of these flats are four-room and five-room flats. 

Notably, the West BrickVille@Bukit Batok project will be up within two years – one of the shortest wait times ever for a project launched by HDB.

Also, eligible first-timers who are single can apply for new two-room flexi flats islandwide at the upcoming BTO exercise. The October BTO exercise will offer 1,902 two-room flexi flats in 10 out of 15 BTO projects in Ang Mo Kio, Bedok, Bukit Batok, Jurong West, Kallang/Whampoa, Pasir Ris and Sengkang.

Outside of the housing market, my colleague Jessie Lim reported that freehold Katong Plaza, which houses 132 retail units and 14 residential apartments, has been sold for S$180 million to Fragrance Group. Currently zoned for commercial and residential use, Katong Plaza has received outline permission from the URA to convert it for hotel use.

However, the collective sale of High Street Centre fell through, after the buyer failed to fork out the initial deposit of S$6.78 million (1 per cent of the S$678 million purchase price) as its funds were still in remittance. The buyer was a private equity fund comprising various high-net-worth investors from the US, Europe and India, making its first acquisition in Singapore. 

China’s stimulus

In China, latest steps to revive the housing market have led to brisk sales and buyer interest during the nation’s October Golden Week holiday. About 130 cities across 20 provinces have rolled out various perks to entice buyers. A rise in the number of visitors to showrooms and transactions in first-tier cities was observed. 

Still, some analysts caution that it is too early to call a burst in China property buying a recovery. China’s property market has been in a slump since 2021 after a string of cash-strapped developers defaulted on loans, leaving behind large inventories of new homes and unfinished projects that have dragged on the broader economy and sapped confidence.

In the UK, home prices in September rose 4.7 per cent from a year ago, according to data from mortgage lender Halifax, as expectations of further reductions in borrowing costs added to momentum in the property sector. On a monthly basis, house prices rose by 0.3 per cent in September, the same rate of increase seen in August.

Are long-stay serviced apartments in Singapore viable? Let me know your thoughts at lyee@sph.com.sg

Top reads this week

• Why the long-stay serviced apartments model should be ditched
• UOL’s Meyer Blue sells half of units at average price of S$3,260 psf at launch
• S$678 million High Street Centre sale falls through
• Fragrance Group buys Katong Plaza for S$180 million
• China’s home sales jump during holiday as 130 cities offer perks