Competition between serviced and private residences to intensify

URA reduced the minimum stay for private properties to three months.

The Urban Redevelopment Authority announced that the minimum stay duration for private residential properties has been lowered from six months to three months.

According to OCBC Investment Research, this is likely to be most relevant for the services residences.

Whilst OCBC Investment Research analyst Deborah Ong reckons that the immediate impact of the new regulation on SRs is negligible for now, the longer term outlook spells a different story.

"We expect a greater shift away from serviced residences as homeowners adjust to the new regulations and companies continue to give their employees more flexibility in choosing their own housing arrangements," Ong explained.

Two REITs under OCBC Investment Research's coverage, Far East Hospitality Trust (FEHT) and Ascott Residence Trust (ART), have SRs in Singapore.

"With the change in regulation, it is likely these Singapore SR portfolios will face increased competition from private residences offering short-term rental further down the road. The question is whether this medium-term supply headwind will be accompanied by a strong recovery in corporate demand," she added.

Photo grabbed from Far East Hospitality website.