Development charge hikes set to ease collective sale fervour

The collective sales market in some prime areas will likely be further dampened by the higher development charges (DC) for non-landed residential use announced yesterday, said property consultants.

The rates, which are assessed every six months, are payable by developers seeking to enhance the use of a site or build a bigger project on it.

They shot up 22.8 per cent for non-landed residential use on March 1 and are now set for a 9.8 per cent increase on average from today, and will be applicable until Feb 28 next year.

Yesterday’s announcement of more increases was expected given the bullish bids by developers for residential sites in state tenders and private sector collective sales.

But further DC hikes look less likely as developers’ thirst for land is moderating after property cooling measures that kicked in on July 6, analysts said.

The rates for non-landed residential use have gone up in 75 of the 118 geographical sectors by between 3 per cent and 33 per cent.

The 33 per cent jump applies in Sector 43 (including Tanglin, Cuscaden and Grange roads and Orchard Boulevard) and Sector 67 (including Dalvey, Stevens, Anderson, Orange Grove, Tanglin, Napier and Cluny roads).

Analysts said the increase in Sector 43 was due to the collective sale of Park House in June at $2,910 per sq ft per plot ratio (psf ppr), a record for any residential land, and the Cuscaden Road government land sale (GLS) site sold in May for $2,377 psf ppr. This was a record for residential GLS land.

But the latest numbers, which tracked market developments in the March to August period, may not fully reflect the current cautious sentiment.

Consultants said there have not been many land transactions since the new measures in July. The full extent of the measures will be seen in the next round of revisions in rates starting March 1, 2019.

That is because developers buying residential property for development now have to fork out another 5 per cent non-remittable additional buyer’s stamp duty. For non-landed residential use, DC rates may flatten or even drop because land prices may drop following the new measures.

Still, the increase in DC rates across the commercial, non-landed residential, hotel/hospital and industry uses reflects improved sentiment and robust investment sales in the market over the past six months.

Increased interest in hotel assets sparked an 11.8 per cent rise on average in DC rates for hotel/hospital use – the first hike since March last year and the biggest since March 2014, when the rate jumped 13.4 per cent.

The 8.3 per cent lift in the DC rates for commercial use is the steepest since they trended up in September 2016.

The biggest jump of 17 per cent was for Sector 110. Analysts cited the GLS tender for the mixed-use site in Holland Village won by a Far East Organization-led consortium for $1.2 billion, or $1,888 psf ppr.

DC rates for industry use rose for the first time since September 2013, up 2.1 per cent on average. Only 26 of the 118 sectors saw a hike in rates – perhaps a sign of patchy recovery and the industrial property market’s gradual stabilisation.

The Ministry of National Development, in consultation with the chief valuer, revises DC rates twice a year, on March 1 and Sept 1. They are based on the chief valuer’s assessment of land values and factor in recent land sales and other property transactions.

Adapted from: The Straits Times, 1 September 2018