Development charges for non-landed homes up 13.8% amid enbloc fever, higher sales

A view of private residential apartments and public housing estates in Singapore. PHOTO: REUTERS
A view of private residential apartments and public housing estates in Singapore. PHOTO: REUTERS

SINGAPORE - The development charge (DC) rates for landed and non-landed homes have been raised amid an enbloc fever and rising property sales.

The increase was highest for non-landed homes. DC rates for this use group was hiked by 13.8 per cent on average, with one sector - the Tampines Road, Hougang, Punggol and Sengkang area - receiving a 29 per cent rise.

The charges are levied by the Government for enhancing the use of some sites or building bigger projects on them. They are revised on a half yearly basis by the Ministry of National Development (MND), in consultation with the Chief Valuer.

MND said on Thursday (Aug 31) that it had raised DC rates for commercial, landed residential and non-landed residential. The new rates take effect on Sept 1.

The DC rates for all other use groups, including industry, places of worship and hotels and hospitals, remain unchanged.

The DC rate hikes for non-landed homes ranged from 6 per cent to 29 per cent.

After the Tampines, Punggol and Sengkang sector, the second highest increase was levied on the sector encompassing Paya Lebar Road, Ubi, Macpherson Road, Eunos Link, Aljunied Road, Sims Avenue and Jalan Eunos. This area as a whole received a 28.1 per cent hike in its DC rate.

Mr Nicholas Mak, the executive director of research consultancy ZACD Group, said this latest round of changes could temporarily cool the enbloc sale fever.

"Depending on the location, the increase in DC rates could have a greater impact on the enbloc sale of 99-year leasehold projects, as it could increase the charges payable for increasing the floor area of the new development, as well as topping up the 99-year lease of the land," he said in a note.

There have been several blockbuster enbloc sales launched this year, including that of Normanton Park for S$800 million and Eunosville, a former HUDC estate site, for S$765.78 million.

The hikes in DC rates also come amid a sharp pick-up in the property market, said Cushman & Wakefield's research director, Ms Christine Li.

In the first half of this year, commercial property transactions rose 23 per cent from the same period a year ago to S$6.9 billion, while residential transactions hit S$6.2 billion, up a whopping 130 per cent.

"Developers paid an average 29 per cent premium over comparable sites for the first five months of 2017, a marked increase when premiums were sub-zero in late 2015 and early 2016," she noted.

"The increasingly bullish bids by developers in recent land tenders is a testament that home prices is likely to increase when these projects reach the market."

The DC rates for landed homes were raised by 7 to 9 per cent, with the hikes applied only to five areas.

The DC rates for commercial use increased by 3.8 per cent on average, with hikes ranging from 3 per cent to 11 per cent.

The biggest hikes were applied to five sectors, including the Paya Lebar, Woodlands and Boon Lay areas.