Direction of DC rates reversed for three use groups - for six months | Singapore Property
On average, these rates are up by 2.7% for non-landed residential use, 0.6% for commercial use and 1.4% for hotel/hospital use
By Kalpana Rashiwalakalpana@sph.com.sg@KalpanaBT
The government has reversed the direction of development charge (DC) rates for three key use groups for the Sept 1, 2016, to Feb 28, 2017, period - on the back of improved sentiment in the property investment sales market.
Sep 1, 20165:50 AM
THE government has reversed the direction of development charge (DC) rates for three key use groups for the Sept 1, 2016, to Feb 28, 2017, period - on the back of improved sentiment in the property investment sales market.
DC is payable for enhancing the use of some sites or to build bigger projects on them. On average, DC rates have been raised by 2.7 per cent for non-landed residential use, 0.6 per cent for commercial use and 1.4 per cent for the use group that covers hotels and hospitals. However, DC rates remain unchanged for landed residential, industrial, place of worship/civic and community institution, and other use groups.
In the previous revision, for the March 1 to Aug 31, 2016, period, the Ministry of National Development (MND) had trimmed DC rates by an average of 0.9 per cent for non-landed residential use, 2.4 per cent for commercial use and 2.2 per cent for the hotel/hospital use. DC rates for industrial use were also clipped 3.1 per cent in the previous revision.
MND, in consultation with the Chief Valuer, revises DC rates twice a year - on March 1 and Sept 1. The rates are stated according to use groups across 118 geographical sectors in Singapore.
In the latest revision announced by MND on Wednesday evening, DC rates for commercial use were raised in 14 geographical sectors by between 4 per cent and 5.3 per cent - and left untouched in the remaining 104 sectors. The 5.3 per cent hike applies to Sectors 1 to 6 (which includes places such as Raffles Place, Phillip Street, Fullerton Road, Coleman Street, Marina Centre and Bugis) and Sector 11 (Raffles Quay, Marina Bay).
Market watchers pointed to the three major office investment sales transactions in the second quarter of this year. These include the sale of Asia Square Tower 1 (in Sector 11) at S$3.4 billion or about S$2,700 per square foot (psf) on net lettable area (NLA) and Straits Trading Building in Sector 1 at S$3,524 psf - the two deals reflect the highest absolute and psf prices respectively on entire office block basis in Singapore.
CBRE Research head of Singapore and South-East Asia Desmond Sim said the two deals "indicate that capital values are still held tightly by landlords and therefore reflected in the implied land values".
Analysts suggest that another transaction that the Chief Valuer probably looked at to support the hike in DC rates for commercial use would be CapitaLand Commercial Trust's purchase of the remaining 60 per cent interest in CapitaGreen; the deal values the entire office tower at slightly over S$1.6 billion, or S$2,276 psf on NLA.
JLL's head of Singapore research Tay Huey Ying added that the recent triggering of the Central Boulevard site from the reserve list of the Government Land Sales (GLS) programme further reinforced the return of investor interest and confidence in office properties. "Hence, it is not surprising that DC rates for the commercial use group have been revised upwards in spite of the current soft occupier demand and rental conditions for office and retail properties," she added.
For non-landed residential use, DC rates were upped in 39 sectors - by about 5 per cent to 12.2 per cent, with no changes to the remaining 79 sectors. The biggest increase of 12.2 per cent applies to Sector 48 (which includes River Valley Road, River Valley Close, Kim Yam Road, Martin Road, Martin Place and Mohamed Sultan Road).
"The relatively sharp increase could be attributed to the record land price paid for the Martin Place condo site at a GLS tender that closed on June 28," said SLP International executive director Nicholas Mak. The price paid translates to S$1,239 per square foot per plot ratio (psf ppr) - the highest unit land price for a pure residential site sold at a state tender since 2009.
The price achieved for another GLS private housing site, at Jalan Kandis near Sembawang Park, is thought to have been used to support an 8.1 per cent DC rate hike for Sector 115 (which includes Sembawang, Mandai and Woodlands areas).
The Chief Valuer may have used the collective sale price for Shunfu Ville in supporting an 8 per cent hike in Sector 107 (which includes the Upper Thomson and Kebun Baru areas), suggested analysts.
Another GLS site, a residential and commercial plot along Bukit Batok West Avenue 6, was probably the evidence used to support a 9.8 per cent rate hike for Sector 113.
Cushman & Wakefield director of research Christine Li described the move to increase non-landed residential DC rates as reflecting "the stabilisation of the housing market and an early sign of bottoming out in the high-end segment".
Fot hotel/hospital use, 61 sectors saw hikes in DC rates ranging from 1.6 to 5.4 per cent, with rates unchanged for the balance 57 sectors, shows JLL's analysis. The largest increase of 5.4 per cent was for Sector 12 (Bayfront Avenue), followed by hikes of 5.3 per cent each for Sectors 41 (Orchard/Somerset) and 43 (Tanglin/Cuscaden).
Analysts said the evidence that was used to support the hike for Sector 43 would be the sale of a hotel-zoned freehold site in Cuscaden Road for S$145 million to Stanley Ho's Hong Kong-listed Shun Tak Holdings. The price worked out to around S$2,145 psf ppr after factoring in an additional S$87 million for development charges for a hotel project.
JLL's Ms Tay expressed her surprise that DC rates for landed residential and industrial use groups were left untouched despite market evidence to the contrary.
She noted that the Urban Redevelopment Authority's price index for landed homes has eroded a total of 12.5 per cent since trending down in Q4 2013; yet the DC rates for this use group have been left unchanged at March 2014's rates. In the industrial segment, she pointed to evidence of weakening land bids amid the protracted manufacturing sector slump which has seen many plants operating at excess capacity.
In Sector 100, at Tampines Industrial Drive, the S$50 psf ppr top bid received for the 20-year leasehold Plot 2 in March 2016 is 12.6 per cent lower than the average S$57.60 psf ppr received for Plots 5, 7, 9 and 12 for which tender closed in the six months between September 2015 and February 2016.
In Sector 114, along Tuas South Link 2, the average 20-year leasehold land price of S$34.60 psf ppr for Plots 7 and 8 submitted in the six months between March and August 2016 is one per cent below the S$34.90 psf ppr average submitted for Plots 5 and 9 when their tenders closed six months earlier.
"Some downward adjustment in DC rates for the industrial use group would better reflect the ongoing soft industrial market condition," Ms Tay added.