Development charges increased for three property market sectors

Rows of shophouses with blocks of high-rise condominium in the Orchard Road estate, on Sept 7, 2016.
Rows of shophouses with blocks of high-rise condominium in the Orchard Road estate, on Sept 7, 2016.PHOTO: ST FILE

Development charges (DC) for three segments of the real estate sector have been increased on the back of strong investment interest and an upturn in property market sentiment. The DC rates for commercial, non-landed residential, and hotel or hospital uses have gone up following increases in the last review as well.

The charges are payable for enhancing the use of some sites, or building bigger projects. They are revised every six months by the Ministry of National Development in consultation with the Chief Valuer.

Most analysts were not surprised by the hike in rates for commercial and condominium uses.

"Developers' hunger for prime commercial sites and residential sites has driven land prices further north over the last six months," noted Cushman & Wakefield research director Christine Li.

The DC rates for commercial use have been raised by 1.3 per cent on average, with the largest jump of 29 per cent in the Shenton Way/ Raffles Quay/Marina Bay Financial Centre area. Analysts said this was underpinned by the recent wave of investor interest in commercial assets, including the record $2.57 billion bid for a white site, or mixed-use site, in Central Boulevard in the Marina Bay area.

Condo DC rates are up an average of 4 per cent, with the sharpest increase of 17 per cent in two sectors covering areas such as Jalan Besar, Serangoon Road, Balestier Road and Bendemeer Road. The increase was likely influenced by deals such as the sale of a Perumal Road site in Little India and another at 1177, Serangoon Road - both went for premiums over their implied land value, consultancy JLL noted.

JLL head of research for Singapore Tay Huey Ying said the rise in condo DC rates is not expected to have a significant impact on the collective sale market.

What took consultants by surprise was the rise in DC rates for hotel or hospital sites, given that there has been no hotel transaction in the past six months and just one deal involving a nursing home site in Venus Drive in the Upper Thomson area.

Hotel or hospital DC rates have been increased by 2.6 per cent on average, with the steepest rise of 19 per cent in several suburban locations, including Punggol and Lornie Road.

Chesterton Singapore managing director Donald Han said: "The rise in hotel/hospital DC rates in the suburbs could perhaps be seen as a way to address short-term stays, such as Airbnb."

However, DC rates for industry use were slashed by 3.7 per cent on average. The largest decline of 14 per cent was seen in sectors comprising areas such as Tampines Road, Boon Lay and Tuas. "(It is) in line with the market conditions... Industrial prices and the occupier market have been facing pressure," noted Mr Desmond Sim, head of CBRE Research for Singapore and South-east Asia.

DCs remain unchanged for other use groups. The revised rates are effective from today to Aug 31.

A version of this article appeared in the print edition of The Straits Times on March 01, 2017, with the headline 'Development charges increased for three property market sectors'. Print Edition | Subscribe