Non-landed DC rates up 9.8% for fifth straight increase
Sat, Sep 01, 2018
THE development charge (DC) rate for redeveloping land has been hiked for non-landed private homes for the fifth straight time, although watchers said that future increases could taper off as property-cooling measures put the lid on the collective-sale frenzy.
Rates for this land-use group have been raised by an average of 9.8 per cent for the next six months, in a move by the Ministry of National Development (MND) on Friday - down from the 22.8 per cent jump in March.
Developers pay the DC, which is based on an assessment of land values, for the right to enhance the use of some sites or to build bigger projects.
The MND revises rates on March 1 and Sept 1 each year, in consultation with the taxman's chief valuer, for land across 118 sectors island-wide.
Besides non-landed homes, rates for the next six months are up for commercial and industrial sites, as well as plots for hotels and hospitals.
They were kept unchanged for landed homes, civic and community institutions and three other land-use groups, which include nature reserves, agricultural land, drains, roads, railways and cemeteries.
The new DC rates, which apply to deals until Feb 28, 2019, come after shock market-cooling measures, which included a non-remissible tax of 5 per cent for developers, kicked in on July 6.
But industry observers said the authorities may put hefty residential rate hikes on ice, with the changes reflecting a surgical approach to land prices.
Non-landed rates were raised almost universally in March, in 116 out of 118 sectors, but fewer than two-thirds of sectors saw increases this time.
The biggest rise in rates, to the tune of 33.3 per cent was in sector 43, spanning Tanglin Road, Cuscaden Road, Orchard Boulevard and Grange Road.
The development charge rate for these areas is S$18,200 per sq m (psm) of gross floor area; in sector 67, which includes Orange Grove Road, the rate is S$16,800 psm.
The neighbourhood hosted record-smashing deals this year, with a government land sale (GLS) in Cuscaden Road in April and the collective sale of Park House in June.
Other areas faced with above-average residential rate increases include parts of Bukit Merah and Telok Blangah, where the rate went up by 27.9 per cent to S$7,700 psm. Huttons Asia research head Lee Sze Teck said that the latest rate revision is likely to be the last increase of more than 5 per cent for non-landed residential sites. He has forecast future changes of zero to 2 per cent.
Meanwhile, sites designated for hotels and commercial use have both been hit with broad-based rate hikes, in 116 out of 118 sectors for each.
The rate increase for hotel and hospital land - 11.8 per cent on average - was unexpected, said Tricia Song, head of research for Singapore at Colliers International, who suggested that the hike was on the back of "the rise in interest in hotel assets of late".
Commercial DC rates were raised by 8.3 per cent on average, after inching up by 2.7 per cent in March, with JLL's Singapore head of research and consultancy, Tay Huey Ying, noting "the sustained uptick in investor sentiment that has started to broaden from the 'Grade A' (central business district) office to the wider market".
Christine Li, senior director of research at Cushman & Wakefield, expects commercial rates to be revised upwards once more, as prime retail rents appear to have bottomed out.
"Coupled with the continued steady compression of cap rates, this will result in capital values rising over the next half-year," she said, referring to the net operating income-to-value ratio. Market watchers also cited the winning S$1.21 billion bid for the mixed-use GLS site in Holland Village as a likely reason for the 16.9 per cent jump in the rate for sector 110, which covers Holland Road and Commonwealth Avenue West, and the 15.7 per cent rise in nearby sector 111.
The tide may be turning for industrial land, where DC rates were raised by 2.1 per cent on average across 26 sectors, reversing five years of stagnancy or decline. The mild uptick "is a reflection of the cautious optimism in the manufacturing sector", said real estate consultancy CBRE.
Three central sectors around MacPherson saw the biggest change of 10.9 per cent. Rates grew to S$2,135 pms, which industry folks attributed to the collective sale of Pei Fu Industrial Building in April.