Land betterment charge rates cut by 5.4% on average for non-landed residential use
Rates are up for landed residential, commercial and hotel/hospital use groups; no change for industrial use group
AGAINST the backdrop of cautious bids from developers for private residential sites at state tenders, the authorities have chopped the land betterment charge (LBC) rates for non-landed residential use by 5.4 per cent on average for the next half year.
This marks the biggest cut in the LBC rate for this use group since the 5.5 per cent decrease in March 2019.
Developers pay an LBC for the right to enhance the use of some sites or to build bigger projects on them.
The rates are announced twice a year, on Mar 1 and Sep 1, following a review by the Singapore Land Authority, in consultation with the taxman’s chief valuer (CV).
The LBC rates are based on the CV’s assessment of land values and take into consideration recent land sales. They are stated according to use groups across 118 geographical sectors in Singapore.
In the latest announcement on Friday, the cuts to LBC rates for non-landed residential use were broad based, with 116 geographical sectors seeing decreases ranging from 2 per cent to nearly 16 per cent. There are no changes for the remaining two sectors.
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According to JLL’s analysis, the biggest drop of 15.8 per cent was for sector 108, which includes the Holland Road, Dunearn Road and Sixth Avenue areas. Located in this sector is the Margaret Drive private housing site offered at a state tender that closed on Aug 1.
The winning bid of S$1,154 per square foot per plot ratio (psf ppr) works out to 29 per cent below the implied land value based on the Mar 1, 2024, LBC rate for non-landed residential use for the sector.
Mogul.sg chief research officer Nicholas Mak said the decline in non-landed residential LBC rates is “not surprising, as property developers have submitted conservative bids in recent state land tenders and the government was willing to sell the land at prices that were lower than comparable land parcels in the vicinity”.
Chua Yang Liang, head of research and consultancy for Southeast Asia at JLL, said: “Overhanging property cooling measures, a high interest rate environment, and rising global geopolitical risks have resulted in a loss in developers’ appetite for the Singapore residential market.”
LBC rates on average were raised for the landed residential, commercial and the hotel/hospital use groups. There is no change in LBC rates for industrial use.
For landed residential use, LBC rates have increased by 2.8 per cent on average. Rates were raised by about 3 per cent in 115 sectors, with no changes for the remaining three sectors.
Lee Sze Teck, senior director of data analytics at Huttons, attributes the increases to a pickup in landed transactions and high-quantum deals in the Good Class Bungalow (GCB) market. A GCB under construction in Tanglin Hill has fetched S$93.9 million or a record S$6,197 per square foot on land area. Its built-up area is nearly 30,000 sq ft.
For the commercial use group, LBC rates have been raised by an average of 1.5 per cent. Rates have gone up in 52 sectors, with increases ranging from 3 to 5 per cent. There are no changes for the remaining 66 sectors.
“There was slightly more interest in the segment and some of the assets linked to the money laundering case were concluded during this period,” said Lee, alluding to sales of some shophouses and strata office units that were owned by those convicted in the case or their associates.
For the use that covers hotels and hospitals, the increase in LBC rates is 0.6 per cent on average. Rate increases ranging from 3 to 6 per cent have been made in 16 sectors, with no changes for the remaining 102 sectors.
JLL executive director of capital markets Tan Hong Boon said: “The impact of the LBC rate revisions on the market would be less significant in the short to immediate term…The mood is certainly more optimistic than it was six months ago. Still, rising geopolitical risks and the continuing trade war between the US and China will cloud the short-term investment horizon.”
Under the Land Betterment Charge Act, which took effect on Aug 1, 2022, charges for the enhancement of land value were consolidated under the SLA.
The LBC regime replaced the development charge (DC), temporary development levy, and differential premium regimes. The DC Table of Rates was correspondingly replaced with the LBC Table of Rates, which continues to be revised on a half-yearly basis.
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