Higher land values in parts of downtown Singapore will mean a hefty jump in taxes that developers pay to enhance the use of some sites or to build bigger projects there.
The taxes, called development charges (DCs), will rise up to 12.2 per cent for some private apartment sites in the District 9 area, such as River Valley.
DC rates were raised for the overall category of residential non-landed use yesterday for the first time in over two years - up 2.7 per cent on average for this property use.
Mr Desmond Sim, CBRE research head for Singapore and South-east Asia, said the Government's move could hint at a further slowdown in price declines for prime homes.
"While it would be safer to depend on the property price index to see if there is any bottoming in property prices, the propping up of implied land values now could signal that price corrections may not be so evident going forward," he said.
The Ministry of National Development, in consultation with the Chief Valuer, revises rates every half year, usually based on transactions over the preceding six months and with an eye on future developments in the area.
In the core central region, the jump in values for the River Valley sector would probably be due to the recent sale of the Martin Place Government Land Sales (GLS) site to GuocoLand for $595.1 million.
The price, working out to $1,239 per sq ft per plot ratio, was a record high for a pure residential GLS site.
A key driver for the DC rate rises for residential non-landed use was stronger-than-expected land bids at GLS tenders, noted Mr Karamjit Singh, JLL head of residential division. "These strong bids were a reflection of tightened land supply this year, which came as many developers are running out or have run out of inventory," he said.
Another part of the core central region, including Somerset Road and parts of Orchard Road, had a 4.9 per cent rise in DC rates for private apartment use, probably due to strong sales at Cairnhill Nine.
The latest DC rate revision saw a rise in three out of five major use groups. They include commercial sites, where rates grew 0.6 per cent on average, and sites for hotel or hospital use, where rates edged up 1.4 per cent on average. Rates for landed residential sites were unchanged, as were rates for industrial sites.
The rise in rates for commercial sites comes on the back of higher interest and transactions in the segment, said Ms Christine Li, Cushman & Wakefield research director.
Total real estate investment sales in the second quarter were valued at $7.22 billion, the highest in 11 quarters, thanks to sales including those of Asia Square Tower 1 and Straits Trading Building, she noted.
The surrounding area - Shenton Way, Raffles Quay and Marina Bay - saw the largest rate increase of 5 per cent for the use group. Overall, DC rates were largely unchanged in a relatively quiet market. They apply from today to Feb 28 next year.