Residential sector may lead hike in DC rates
Marina Bay, Circle Line could give rates a nudge; collective sales may feel fallout
By KALPANA RASHIWALA
(SINGAPORE) Development charges are set to appreciate further, led by the residential sector which has seen brisk land deals. These charges are payable to enhance or intensify the use of some sites.
'The upcoming DC rate revision is likely to be monitored closely by industry players as the extent of revision would indicate the government's assessment of the exuberance of the property market, providing clues on the government's propensity to implement further market cooling measures,' suggests Colliers International director (research and advisory) Tay Huey Ying.
Property consultants suggest that DC rates for non-landed residential use could increase about 10-15 per cent on average from Sept 1. The rate for landed residential use could climb by up to 20 per cent on average. During the last revision effective March 1 this year, the average DC rates for non-landed and landed residential use were upped 8.5 and 12.5 per cent respectively. Commercial, industrial and hotel use DC rates could post modest rises on average.
'Chief Valuer is likely to consider the positive impact generated from the opening of Marina Bay Sands and the improved accessibility from the newly opened MRT stations on the Circle Line in assessing upcoming DC rates,' says Ms Tay.
DTZ's South-east Asia research head Chua Chor Hoon predicts that for residential and commercial DC rates, some of the biggest jumps will be in Sentosa, the prime residential districts and the CBD.
DC rate revisions are also tracked by those involved with redevelopment sites with a sizeable DC payment, including some collective sale sites. 'If the DC rate increases significantly, a developer would typically pay less to the owners, making it harder to transact en bloc sales,' says veteran property consultant Lee Hon Kiun, director of Landmark Property Advisers.
Karamjit Singh, managing director of Credo Real Estate, says that 10 per cent of the en bloc sites his company is working on have a significant DC component of at least 5 per cent of total land value. 'About 30 per cent involve a DC component below 5 per cent of total land value, while the majority 60 per cent don't have any DC.'
DC rates - revised on March 1 and Sept 1 each year - are specified by use groups (such as landed and non-landed residential, commercial and hotels) across 118 geographical sectors throughout Singapore. The review is conducted by the Ministry of National Development in consultation with Chief Valuer, who takes into account current market values.
Colliers' Ms Tay predicts that on average, DC rates for non-landed residential use will rise about 10-15 per cent, with city-fringe locations leading the hikes.
The biggest rise, possibly to the tune of 30 per cent, could be in the geographical sectors containing the Circle Line stations at Mountbatten, Dakota and Macpherson which opened in April, as well as the Fort Road and Kampong Bahru areas.
Ms Tay points to the sale of the freehold Fort Terrace site in March at a unit land price that was 137 per cent above the imputed land value based on the March 1 DC rate for the area. Harbourside Apartments at Kampong Bahru was sold in April at a unit land price 99 per cent above the DC rate-implied land value for the location.
High bids at state tenders for condo sites in places like Simei St 3, Tampines Ave 1/10, Lakeside Drive, Sembawang Road/ Canberra Drive and Yishun Ave 2/7 may also lead to a surge of about 20 per cent in non-landed residential DC rates in these areas, Ms Tay reckons.
Jones Lang LaSalle associate director Desmond Sim predicts the biggest jumps in non-landed residential DC rates of about 20 per cent will be in suburban locations, due to bullish land bids at state tenders. 'In prime districts, the increase could be about 5-10 per cent,' he added.
For landed residential DC rates, Mr Sim forecasts a 15-20 per cent average rise. 'A bigger increase is expected at Sentosa Cove, as well as districts 9, 10 and 15, given the stronger transaction volume and price movements in these areas,' he added. Colliers reckons that on average, the increase will be up to 10 per cent, while CB Richard Ellis executive director Li Hiaw Ho expects gains in sectors with a large proportion of landed homes, citing continued strengthening in prices of such properties.
DTZ's SE Asia research head Chua Chor Hoon sees a bigger jump for landed residential rates than for non-landed residential rates as the landed market has been hot this year due to scarcity value.
Industrial DC rates could be raised up to 10 per cent on average, says Colliers' Ms Tay, citing state land sales of industrial sites at high prices. In addition, JTC Corporation has revised upwards its industrial land rents in most areas by 10-15 per cent from June 1.
For commercial use, the hike in DC rates could average up to 2 per cent. Increases may be in sectors that include Marina Bay Sands as well as the 11 new Circle Line stations, which opened in April. CBRE predicts a 15-20 per cent rise in the rate for Jurong, following the sale of a plot at Jurong Gateway Road at a bullish price in June.
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
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