For the first time since March 2019, Development Charges (DC) for residential, commercial, and industrial land use have been increased, effective from Tuesday (March 1).
This comes amid a broad recovery in Singapore’s property market, although the hotel market continues to be weighed down by the pandemic.
Developers pay the development charge to the government for the right to enhance land use density, which increases its value, or to build larger projects on it. It also reflects the demand for land from developers.
After three consecutive rounds of reductions since September 2020, the Ministry of National Development (MND) has raised the development charge for commercial land by 0.7%. Healthy investment sales in industrial land helped drive the DC for industrial use up by an average of 2.2%, after it was previously left unchanged for several periods.
Following the latest round of cooling measures, the rate of increase for development charges for both landed and non-landed residential sites has moderated, with a much smaller increase for non-landed residential use.
In this round, the DC for landed residential use rose by an average of 4.8%, while the rate for non-landed residential use increased by just 0.3%. This compares with the previous revision, where landed residential rates increased by 6.3% and non-landed residential rates by 10.9%.
For landed residential use, DC rates increased by between 1% and 10% across all 118 sectors.
AnjiaSG’s senior real estate agent, Guo Yaoyang (Leo Kwek), said this was driven by strong sales of Good Class Bungalows (GCBs), stemming from “demand from digital economy entrepreneurs, key executives, and new citizens amidst Singapore’s economic recovery, ample liquidity, and a low-interest-rate environment.”
On the other hand, Guo Yaoyang said the modest increase in the DC for non-landed residential use comes as a relief to the market, which is still assessing the impact of the December 2021 cooling measures.
The DC rates were raised by 3% to 15% in only 6 sectors, with rates in the remaining 112 sectors unchanged.
“The largest increase of 15% was in the Guillemard Road, Mountbatten Road, Old Airport Road, and Dunman Road area. This was likely due to the sale of sites on Thiam Siew Avenue to a joint venture between Hoi Hup Realty and Sunway Developments last November for S$815 million, which translates to S$1,488 per square foot per plot ratio,” said Guo Yaoyang.
Guo Yaoyang noted, “The flattening of DC rates means that the cost of intensifying land use remains unchanged, and developers may be more inclined to look at en bloc sales (En Bloc) to replenish their land banks.”
Meanwhile, Guo Yaoyang also pointed out that commercial investment sales might be more active than residential collective sales.
He said: “The modest 0.7% increase in the DC for commercial use will not deter collective sales of commercial properties.”
Guo Yaoyang pointed out that the increase in commercial DC rates was mainly concentrated in the city center areas, such as Raffles Place and Tanjong Pagar, where rates rose by about 2.6% to 3.2%. He added that DC rates in most suburban and city-fringe areas remained unchanged.
He said that recent noteworthy office transactions include the sales of PIL Building, One George Street, and the Robinson 112 office project.
The DC rate for hotel/hospital use was reduced by an average of 0.7%, partly due to fewer tourists and lower occupancy rates.
Guo Yaoyang also mentioned the lukewarm response to the Government Land Sales (GLS) tender for the Marina View site, which included a significant hotel component.
He noted that DC rates decreased in 25 out of the 118 sectors, with the largest drop of 10% in the areas of Shenton Way, Straits Boulevard, Marina Boulevard, and Raffles Quay.
Guo Yaoyang said: “This is likely due to the Marina View site being acquired in September 2021 for S$1.5 billion, or S$1,379 psf ppr, by the sole bidder who triggered the land tender.”
Meanwhile, DC rates for all other land uses remain unchanged: places of worship/civic and community institutions; open space; agriculture; and roads/railways.
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