DC rates for non-landed residential use dip on weaker home prices

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http://www.businesstimes.com.sg/arch...rices-20140830

Published August 30, 2014

DC rates for non-landed residential use dip on weaker home prices

No change for landed and industrial use; 9% average rise for places of worship, hotels

By Kalpana Rashiwala

[email protected] @KalpanaBT


THE authorities have trimmed development charge rates for non-landed residential use by an average of 1.6 per cent from Monday. This is not surprising given the weakening in non-landed private home prices, say analysts.

Landed residential DC rates were left untouched as were the rates for industrial use. For commercial use, DC rates were raised 1.9 per cent on average.

DC rates - which are payable for enhancing the use of some sites or building bigger projects on them - will go up by an average of 9 per cent each for two use groups: one which includes hotels and hospitals, and the other, places of worship and civic and community institutions.

The increase in the latter use-group is thought to have been supported by prices attained in the sale of sites by the state for temples and churches in locations such as Sengkang, Woodlands and Punggol.

As for the 9 per cent average hike in hotel DC rates, Donald Han, managing director of Chestertons, said: "Hotel values have remained fairly inflated in the past six months and that could have led Chief Valuer to raise DC rates. But this is slower compared to the previous hotel use DC rate hike of 13 per cent six months ago."

DC rates are revised on March 1 and Sept 1 and stated according to use-groups across 118 geographical sectors. The Ministry of National Development (MND), in consultation with the Chief Valuer, revises DC rates based on current market values.

The new rates are effective from Sept 1 to Feb 28.

The drop in the average DC rate for non-landed residential use is the first since March 2012, an analysis by JLL shows.

MND said on Friday that non-landed residential DC rates will fall between 2.8 per cent and 5 per cent in 55 geographical sectors, with no change in the remaining 63 sectors.

The 5 per cent fall is in Sector 72- Prince Charles Crescent, Alexandra Road and Tanglin Road - and Sector 86 - Telok Blangah Heights, Telok Blangah Drive, Henderson Road, Depot Road, and Alexandra Road.

The drop in Sector 72 is probably due to the winning bid by a UOL-Kheng Leong tie-up for Prince Charles Crescent Parcel B at a state tender in April being 14.5 per cent lower than what a Wing Tai-led consortium had paid in 2012 for the next-door Parcel A, said market watchers.

For the commercial use-group, DC rates will go up 5-11 per cent in 26 sectors, with no changes in the rest. The top hike applies to Sector 59 only (which includes Balestier Road).

The sale of strata commercial units at Balestier Towers in July is thought to have provided evidence for the hike.

"As knock-on effects, the neighbouring sectors of 58, 60, 61 and 62 saw 8-10 per cent increases" said JLL head of South-east Asia research Chua Yang Liang.

Sector 115, which includes Woodlands, saw a 10 per cent hike, supported by the recent sale of the Woodlands Square office site, again producing a knock-on effect for the nearby Sectors 113 and 114.

DC rates for hotel use were raised by 7-10 per cent in 116 sectors. Among the sectors that saw the 10 per cent hike was Sector 51, which includes Beach Road. The sale of 700 Beach Road as a hotel redevelopment site is thought to have been used as supporting evidence.

For the use-group covering places of worship and civic and community institutions, rates were hiked in all sectors - by 8-11 per cent. Among the sectors that saw the top-end rise were 106 (which includes the Fernvale locale in Sengkang), 115 (which includes Woodlands) and 100 (including Punggol).

A 30-year leasehold plot in Fernvale Link designated for Chinese temple development was sold in July at 185 per cent above the land value implied by the then-prevailing March 1, 2014 DC rate, said Colliers International director Chia Siew Chuin.

Commenting on the government's decision to leave industrial use DC rates untouched in all sectors, Ms Chia pointed to mixed evidence at industrial state land tenders over the past half year - with some sites fetching prices below imputed land values based on the prevailing DC rates at the time, while other plots changed hands at above the respective DC rate-implied land value for the respective locations.

Moreover, JTC Corp has trimmed its posted land rents and land premiums by some 5 per cent for the current period starting July 1, 2014, amid mixed manfacturing performance and a softening industrial property market.

"Perhaps the lack of clarity in the direction of land prices in the industrial property market has prompted the government to monitor the market for a while longer before making any changes to DC rates for industrial use," said Ms Chia.

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http://www.straitstimes.com/archive/...-fall-20140830

Development charges for condos fall

Drop reflects weak residential market; but rates for commercial land up sharply

PUBLISHED ON AUG 30, 2014 1:02 AM

BY CHERYL ONG


DEVELOPMENT charges - the rates developers pay the Government to enhance land use - have fallen for the first time in almost 18 months for residential sites earmarked for non-landed homes such as condominiums.

However, these rates shot up for commercial land, places of worship, civic institutions, as well as hotels and hospitals.

Development charges, which can be a significant cost in a redevelopment, are revised after regular half-yearly reviews based on land prices and market deals.

They fell by an average of 2 per cent for non-landed homes, on the back of flagging property sales since the start of the year.

The new fees were released by the Urban Redevelopment Authority (URA) yesterday.

They are applied when the value of a site goes up because of a re-zoning or when a taller building can be erected after a change in the site's plot ratio.

Consultants said they expected the dip in the rates for non-landed residential plots, given the 2.1 per cent slip in the official residential price index in the first half of the year.

Bids for land sold under the Government Land Sales programme have also been conservative, noted Ms Chia Siew Chuin, director of research and advisory at Colliers International, unless the plot is in a popular area.

Moreover, the collective sale market has screeched to a halt this year, she said.

However, the dip in development charges is not expected to boost the acquisition of land significantly, because the risk of shrinking profits from falling property prices is still far greater, noted Mr Nicholas Mak, research head at SLP International.

This was because "the reduction in the development charge rate would only increase the developer's return on investment of the residential project by 1 per cent, assuming all other factors remain unchanged".

Non-landed residential plots in Prince Charles Crescent, Alexandra Road, Tanglin Road, Henderson Road, Depot Road and the Telok Blangah area recorded the sharpest dips of 5 per cent.

On the other hand, experts were surprised by the 9 per cent hike in fees for land slated for hotels, hospitals, places of worship and civic institutions - the highest average across all segments.

After all, hotel deals this year have paled in comparison with the "landmark year of transactions" last year, said Dr Chua Yang Liang, head of research Southeast Asia at Jones Lang LaSalle (JLL).

The increase in charges for land for places of worship and civic institutions was also the first hike in five years, JLL noted.

"We believe that the upward revision in both (categories) is for the overall harmonisation of development charge rates with other use groups," said Dr Chua.

For the commercial sector, charges rose by an average of 2 per cent, with the highest increases in places such as Balestier Road, Thomson Road and the Novena area.

This was largely thanks to the uptick in strata-sales activity at Balestier towers, Dr Chua added. Construction group Low Keng Huat, for instance, had in July forked out about $64 million for 36 units at the mixed-use project in Balestier Road.

The rates were unchanged for landed residential and industrial sites.

Though there were transactions for industrial land in the review period which showed that development charge rates were "trailing behind land prices", there were also plots of industrial land being sold for less than the land value imputed by the development charge for the area, said Ms Chia.

For instance, the highest bid for a plot in Tuas South Avenue 7 was 22.7 per cent lower than the land value imputed by its development charge.

The new development charges will take effect on Monday.

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