Development charges for non-landed residential use cut again

The average reduction of 0.3 per cent for non-landed residential use compares with a 5.5 per cent drop at the rate revision in March - the first time they had been lowered in three years.
The average reduction of 0.3 per cent for non-landed residential use compares with a 5.5 per cent drop at the rate revision in March - the first time they had been lowered in three years.PHOTO: ST FILE

Development charge (DC) rates for non-landed residential use have been cut again amid a softer economic outlook.

But the reduction of 0.3 per cent on average for the period Sept 1 to Feb 29 next year is well below the 5.5 per cent drop when rates were revised in March this year.

That suggests rates may be firming, especially in the light of a 1.5 per cent rise in the second-quarter private residential price index, JLL senior director of research and consultancy Ong Teck Hui said. Developers pay DCs for the right to enhance the use of some sites or to build bigger projects on them.

The September revision has hiked DC rates for commercial use by 1.7 per cent on average after being lifted 9.8 per cent in March.

These rates were raised again as commercial asset prices have benefited from business relocation and investment diversion to Singapore amid heightened geopolitical tensions, said Ms Christine Li, head of research for Singapore and South-east Asia at Cushman & Wakefield.

The rates in Sector 51 (North Bridge Road, Beach Road) rose 3.6 per cent to $10,150 per sq m, due to the Duo Tower and Duo Galleria transaction at $2,570 per sq ft (psf), said Ms Tricia Song, Colliers International's head of research for Singapore. Rates in Sector 7 (Cecil St, Robinson Road, Shenton Way) and Sectors 9-10 (Anson Road, Palmer Road, Tanjong Pagar Road) rose 2.9 per cent to 3.1 per cent, due to large-ticket commercial deals, including Anson House ($2,435 psf) and 71 Robinson ($2,756 psf), she added.

DC rates for the commercial use group were raised in 59 sectors by between 3 per cent and 7 per cent, with no change for the remaining 59 sectors. The largest increase of 7 per cent was seen in areas including Tampines Road, Ang Mo Kio, and Upper Bukit Timah Road (Sectors 100, 105, 112).

Rates for the use group that includes hotels and hospitals remained unchanged partly due to a lack of significant hotel transactions. This follows a 45.6 per cent rate spike in March, which likely proved to be too punitive, Ms Song said.

The National Development Ministry revises the rates on March 1 and Sept 1 each year, in consultation with the taxman's chief valuer. They are based on the chief valuer's assessment of land values and factor in recent sales. They are stated according to use groups across 118 geographical sectors here.

Rates remain unchanged for landed residential, industrial and 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.

But they have been reduced for non-landed residential use in seven sectors by between 4 per cent and 7 per cent. Rates were left untouched for the remaining 111 sectors.

The biggest drop of 7 per cent was in Sector 112, which includes Bukit Batok East Avenue 6, Upper Bukit Timah Road, Clementi Road and West Coast Highway.

Ms Song cited the "disappointing bid price" of the Clementi Avenue 1 government land sales site tender at $788.30 psf per plot ratio. This was significantly below market expectations and below the implied land rate in this sector ($883 psf before Aug 30), she added.

Sector 34, which includes Sophia, Upper Wilkie and Mackenzie roads, saw DC rates dropping 6.5 per cent to an implied land rate of $1,347 psf.

Mr Nicholas Mak, ERA Realty's head of research and consultancy, said this could be due to the collective sale of Sophia View, a small apartment block that reportedly went for $9.28 million. This sale, which is likely below expectations, could have contributed to the decline in DC rates for that sector, he added.

A version of this article appeared in the print edition of The Straits Times on August 31, 2019, with the headline 'Development charges for non-landed residential use cut again'. Print Edition | Subscribe