Development charges cut for commercial and hotel use

Development charges (DC) have been cut for commercial, hotel and other land use, with large decreases for central areas such as Shenton Way, Marina Bay Sands and Orchard Road.

The largest cuts in the latest half-yearly review were for two main property use groups that have been most affected by the Covid-19 pandemic - hospitality and medical; and commercial.

Charges for hotel and hospital development use have been slashed by an average 7.8 per cent, while those for commercial use were reduced by 3.6 per cent on average.

This is the first time that DC rates for commercial land have been lowered since they began trending up in September 2016, noted JLL Singapore research and consultancy head Tay Huey Ying yesterday.

The largest reduction - 7 per cent - applies to areas 11, 12, 41 and 42, which include districts with a high concentration of tourist amenities and malls such as the Bayfront area, Cairnhill Road, Somerset Road and Shenton Way.

Businesses in these areas are the most affected by the fallout from the pandemic, noted Ms Tay.

"Travel bans and curtailment had kept foreign visitors away while domestic shoppers have fallen as they turned to e-commerce or shop and dine near home," she added.

The Ministry of National Development (MND) announcement yesterday noted that for commercial use, 110 out of the 118 sectors have had DC rates reduced by 3 to 7 per cent while eight were left unchanged.

Rates for hospitality sites were left flat after the previous two reviews, but the severe impact the industry has taken amid the pandemic has led to the biggest cuts this time - around 7.8 per cent.

Ms Tricia Song, head of research for Singapore at Colliers International, noted that it is the largest decline since they fell 9.6 per cent in March 2009.

"Despite a dearth of actual hotel transactions, the decline in DC rates is reflective of the operating conditions for hotels given the sharp declines in global travel and revenues," she said.

The lack of sales this year is in stark contrast to 2019 when hospitality transactions hit a record $5.7 billion.

The DC rates for residential non-landed use also decreased - down by 0.8 per cent on average and the fourth consecutive downward revision. Rates for industry use decreased by 0.9 per cent.

These smaller declines show that residential and industrial properties have been relatively more resilient during the pandemic, said Ms Song.

MND revises the rates on March 1 and Sept 1 each year, in consultation with the taxman's chief valuer.

Rates remain unchanged for landed residential, place of worship/civic and community institution uses as well as for three other land-use groups: nature reserves; agricultural land; drains, roads, railways and cemeteries.

Ms Tay said the DC cuts reflect the wary approach being taken by firms now: "Most businesses are likely staying cautious on their space requirements and hence continue to weigh on both rents and prices in the coming quarters."

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A version of this article appeared in the print edition of The Straits Times on September 01, 2020, with the headline Development charges cut for commercial and hotel use. Subscribe