Development charge rates up from today

Singapore

DEVELOPMENT charge (DC) rates - payable for enhancing the use of some sites or to build bigger projects on them - have been raised from today by an average of 15 per cent for commercial use and 13 per cent for hotel/hospital use.

For landed and non-landed residential uses, the average increase is about one per cent each, while rates for industrial use have been left completely untouched.

The Ministry of National Development, in consultation with the Chief Valuer, revises DC rates based on current market values twice a year - on March 1 and Sept 1. The rates are stated according to use groups across 118 geographical sectors in Singapore.

DC rates for the major use groups are expressed as per square metre of gross floor area.

Property consultants said the modest rise in residential DC rates was in line with softening home prices in the past half year.

Signs of incipient softening in the industrial property market were probably behind the decision to leave DC rates for the use group unchanged. This was despite ample evidence of industrial sites fetching prices at state tenders that were higher than land values implied by the previous DC rates, argued Colliers International director Chia Siew Chuin.

Jones Lang LaSalle's (JLL) head of SE Asia research, Chua Yang Liang, said the DC rate hike for hotel use was supported by the active hotel investment market.

"Typically, DC is payable for sites where the development potential has not been fully maximised (mostly privately held sites)," explained Karamjit Singh, head of investments and residential at JLL. "Even for sites where the gross floor area has been maximised, DC rates are still relevant for the amount of money payable to the state to build the 10 per cent bonus GFA for balcony and other use. This applies even to 99-year condo sites bought at state tenders," he added.

During the heyday of collective sales, DC rates were closely monitored by property agents and owners with en bloc potential. However, the impact of this round of DC rate revisions on residential en bloc sales is very minimal, said Mr Singh. "In any case usually less than half of en blocs attract DC and even then DC forms a relatively small component of the entire land cost."

This round, non-landed residential DC rates have been raised in only 15 geographical sectors (by 6 to 10 per cent), with no changes in the remaining 103 sectors. The largest increase at 10 per cent is in Sector 101 (Paya Lebar/Aljunied/Macpherson/

Sims Avenue/Eunos Link). The increase was supported by the sale of a 99-year private housing site in Geylang East Avenue 1 at a state tender in January at $776 per square foot per plot ratio (psf ppr) - or 67 per cent above the land value implied by the-then prevailing Sept 1, 2013, DC rate, explained Colliers' Ms Chia.

She suggested that a 9.1 per cent rise in Sector 100 (including Sengkang/Punggol) could have been due to the sales of two adjoining sites in Upper Serangoon View in December for $522 psf ppr - 33 per cent more than the Sept 1, 2013, DC rate-implied land value. The other locations that saw higher non-landed residential DC rates include the sectors that include Kallang, Upper Boon Keng, Geylang Bahru, Tampines, Bedok Reservoir, Kembangan, Pasir Ris, Choa Chu Kang, Woodlands, Sembawang, Seletar, Bukit Batok, Mount Emily, Bendemeer and Whampoa.

Commercial use DC rates were raised for 89 geographical sectors (by 14-29 per cent), with no changes in the other 29.

The biggest hike of 29 per cent was for Sector 108 (which includes Sixth Avenue, Holland Road, Commonwealth Avenue Tanglin Road, Adam Road). This was supported by the sale of 100 Taman Warna which, based on JLL's analysis, was 54 per cent above the previous DC rate-implied land value. In Upper Thomson, the transaction of Long House at 41 per cent premium to the previous DC rate-implied land value probably supported a 22 per cent hike for Sector 107.

The same percentage rate hike was seen in Sector 53 (which includes Little India), in the light of Serangoon Plaza's sale at 169 per cent above the DC rate-implied land value - producing a knock-on effect on the neighbouring Sector 58, which posted a 21 per cent rise.

Tang Wei Leng, executive director (investment sales) at Colliers International, said DC rates remained unchanged for the two major commercial en bloc sales she is working on - The Arcade in Collyer Quay and Tanglin Shopping Centre. "In the past six months, there have been no significant commercial property deals in these locations to justify any change in DC rates."

For landed residential use, DC rate were upped in 13 sectors by 9-10 per cent, with no change for the remaining 105 sectors. For hotel/hospital use group, the biggest jump of 31 per cent is arein Sectors 93 & 94 (Changi Road/East Coast/Marine Parade area).

From today, the Urban Redevelopment Authority's website offers a new free e-service that allows information on DC rates to be accurately retrieved for any site on a Geographical Information System-enabled digital map.