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DC rates hiked 22.8% on average for non-landed residential use, 2.7% for commercial use

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ON the back of bullish land bids by land-hungry developers in the past six months, the government has hiked development charge (DC) rates for non-landed residential use by 22.8 per cent on average. This is a steeper hike compared with the 13.8 per cent increase during the last revision six months ago and the biggest increase since Sept 2007, when the rate soared by an average of 57.8 per cent.

DC rates for commercial use are also being increased by an average of 2.7 per cent in the latest revision - albeit lower than the 3.8 per cent rise in the previous round.

DC is payable for enhancing the use of some sites or to build bigger projects on them.

The latest DC rates are for the period Mar 1, 2018 to Aug 31, 2018.

The Ministry of National Development (MND), in consultation with the Chief Valuer (CV), revises DC rates twice a year, on March 1 and Sept 1. The rates are based on CV's assessment of land values and take into consideration recent land sales and other property transactions. DC rates are stated according to use groups across 118 geographical sectors in Singapore.

MND said on Wednesday evening that DC rates remain unchanged for landed residential and industrial uses as well as the use groups that cover hotel/hospital, place of worship/civic and community institution, and three other use groups.

For non-landed residential use, DC rates have gone up in 116 of the 118 geographical sectors by between 12 per cent and 38 per cent, with no change to the remaining two sectors.

The biggest jump of 38 per cent is for the following three sectors:-

Sector 19 (River Valley Road/Kim Seng Road/Jiak Kim Street/Martin Road/ Mohamed Sultan Road/Clemenceau Avenue/Outram Road).

Sector 23 (Oxley Rise/Oxley Road/Penang Road/Orchard Road/Dhoby Ghaut/Handy Road/Selegie Road)

Sector 34 (Sophia Road/Upper Wilkie Road/Mackenzie Road/Niven Road/Kirk Terrace / Adis Road).

Analysts say the rate hike in Sector 19 was due to the record price for 99-year leasehold private residential land for a site in Jiak Kim Street at a state tender that closed last December; the S$1,733 per square foot per plot ratio (psf ppr) winning bid by Frasers Centrepoint (now known as Frasers Property) was about 40 per cent higher than the previous record of S$1,239 psf ppr that GuocoLand paid in June 2016 for a nearby site which it is developing into the Martin Modern condo.

"The steep increase in Sectors 23 and 34 is most likely due to the near-record price paid (of S$1,722 psf ppr) for the Handy Road Government Land Sale site last month," said Cushman & Wakefield research director Christine Li.

High-profile collective sale sites awarded such as Royalville in Bukit Timah and Pearl Bank Apartments near Chinatown have also resulted in an increase of DC rates for Sectors 109 and 18, which rose by 35.0 per cent and 31.6 per cent, respectively, she added.

"The latest round of DC revision is a clear reflection of the escalating residential land prices paid by land-starved developers at both state tenders and collective sales," she noted.

Property consultants generally do not expect the DC rates hikes to dampen the current wave of en bloc sales.

JLL's head of Singapore research and consultancy, Tay Huey Ying, said: "The steep increase in DC rates for non-landed residential use group is unlikely to derail the collective sales market as many developers have secured only one site or none at all and there will still be demand for sites at this early stage of recovery.

"Nonetheless, the sharp increase in DC rates could widen the buyer and seller price expectations for sites that attract significant development charge levy and this could lead to more sites experiencing protracted sales period," she added.

ZACD Group executive director Nicholas Mak said: "Developers would have to decide whether to lower their bids in their land acquisitions or to accept lower profit margins. As the en bloc sale market is gradually turning into a buyers' market, some developers are more likely to lower their bids, especially for en bloc sale projects that are seeking buyers via private treaty. As a result, the escalation in land prices could slow down."

Ms Li of Cushman & Wakefield too opined that the latest round of DC revisions is unlikely to dampen the current collective sales fever given the huge war chest of capital that developers have built up over the past years.

"While the increase in development charge rates is not expected to impact collective sale sites with a high development baseline, developers may moderate their bids for sites which have a low development baseline and are accordingly subjected to high development charges, in order to maximise their gross floor area under the Master Plan."

MND announced on Wednesday that commercial use DC rates are going up in 41 of the 118 geographical sectors by between 4 per cent and 16 per cent. There is no change to the DC rates for the remaining 77 sectors.

The largest increase of 16 per cent applies to the following sectors:-

Sectors 1 & 2 (Cross Street/Collyer Quay/Fullerton Square/Boat Quay/ South Canal Road/South Bridge Road/Church Street/Telok Ayer Street)

Sectors 3 to 5 (Ophir Road/Rochor Road/Victoria Street/Hill Street/

Singapore River/Suntec City/Raffles Boulevard)

Sector 6 (Collyer Quay).

Analysts attribute the above hikes to the sale of the commercial site in Beach Road at a state tender last September at S$1,706 psf ppr, higher than the S$1,689 psf ppr achieved for the white site along Central Boulevard, a more choice location in the Marina Bay area, in the preceding year.

During the previous DC rate revision (for the Sept 1, 2017 to Feb 28, 2018 period), commercial use DC rates went up on average by 3.8 per cent.