WhyItMatters

DC decisions speak volumes

DC rates for industrial sites were lowered by an average of 3 per cent - its first and largest cut since the 4.5 per cent reduction in September 2005.
DC rates for industrial sites were lowered by an average of 3 per cent - its first and largest cut since the 4.5 per cent reduction in September 2005. ST PHOTO: KEVIN LIM

Anyone seeking clues as to how the Government sees the property sector ought to study the changes to development charges (DCs) announced on Monday.

They provide a handy snapshot about a complex sector that is experiencing strains in some areas but regarded as healthy enough in others.

DCs are levies developers pay for enhancing the use of a site or building a bigger project. They are revised every six months in the light of market values. So any change would point to how the Government sees the sector.

For the first time in about seven years, the DCs for a wide range of sites have been left unchanged, at least until the review on Feb 29 next year.

These include plots set aside for landed and non-landed residential use, commercial use, hospitality use and hospitals.

But DC rates for industrial sites were lowered by an average of 3 per cent - its first and largest cut since the 4.5 per cent reduction in September 2005.

There are signals flashing across both decisions.

Lowering DC rates for industrial sites is as clear an indication as any of how that market is contracting amid a slowing global economy.

Yet keeping rates the same across the broader market is surely a sign that the Government is happy with the pace of decline it is seeing in the once red-hot real estate market.

Prices of non-landed homes in the second quarter, for instance, eased about 9 per cent from the peak in the third quarter of 2013.

Developers will not welcome the decision to leave the rates unchanged, given the muted sentiment in the property sector.

Analysts such as Mr Desmond Sim, CBRE research head for Singapore and South-east Asia, noted that while some segments in the market are beginning to see slight improvements, it would be "too quick" to revise the rates.

But with prices set to stabilise, perhaps a cut in DC rates could be back on the table in the next round of revisions.

A version of this article appeared in the print edition of The Straits Times on September 02, 2015, with the headline 'DC decisions speak volumes'. Print Edition | Subscribe