New Reporter
04-09-23, 15:05
Cut in land betterment charge rates for non-landed housing not expected to lift en bloc deals
LBC rates raised by average of 0.4% for commercial use and 3% for hotel use; no change for all other uses including landed residential and industrial
Aug 31, 2023
FOR the first time in three years, the government has cut land betterment charge (LBC) rates for non-landed residential use.
However, most market watchers do not expect this to provide a fillip to the residential collective sale market due to bigger hurdles at play.
Developers pay an LBC for the right to enhance the use of some sites or to build bigger projects on them.
The government has reduced LBC rates for non-landed residential use by an average of 3.2 per cent for the period Sep 1, 2023 to Feb 29, 2024. This contrasts with a 0.3 per cent increase in the previous revision for the Mar 1 to Aug 31 period of this year.
However, for the use group that covers hotels and hospitals, LBC rates have gone up 3 per cent on average after being raised 1 per cent in the previous revision.
LBC rates for commercial use have inched up 0.4 per cent on average, after being left untouched in the previous revision.
There are no changes in LBC rates for landed residential and industrial uses, as well as for place of worship/civic and community institution use.
Also left untouched are the rates for the other use groups that cover open space/nature reserve, agriculture, and drains/roads/railways.
https://i.imgur.com/dg3SGZ1.png
The latest LBC rates were announced on Thursday (Aug 31), following a review by the Singapore Land Authority (SLA) in consultation with the taxman’s chief valuer (CV).
The LBC rates are based on the CV’s assessment of land values and take into consideration recent land sales. They are stated according to use groups across 118 geographical sectors in Singapore.
For non-landed residential use, the decreases in LBC rates were broad-based, with 111 geographical sectors seeing cuts ranging from 2.5 per cent to 11.1 per cent, with no changes for the remaining seven sectors. The largest drop of 11 per cent was in four sectors in the Marina Bay and surrounding areas.
JLL’s head of research and consultancy for Singapore, Tay Huey Ying, pointed to the recent state land tender closing for a site in Marina Gardens Lane which is zoned for residential, with commercial use at first storey. The plot drew four bidders, but only the top bid by the Kingsford Group was in line with expectations. “The remaining bidders approached the site with a cautious and opportunistic mindset,” she added.
In Sector 107, which includes the Upper Thomson area, the non-landed residential LBC rate was chopped by 6.3 per cent.
Knight Frank Singapore’s head of research, Leonard Tay, said: “This was likely due to the sole bid of S$985 per square foot per plot ratio for the site in Lentor Gardens at a state tender in April 2023, a rate lower than all the other Lentor state land tender sites that preceded it.”
JLL’s analysis showed that the unit land rate fetched for the site was 12 per cent below the land value implied from the Mar 1, 2023 non-landed residential LBC rate for Sector 107.
Likewise, the non-landed residential site in Jalan Tembusu in Sector 92 was recently awarded to the top bidder at a land rate 23 per cent lower than the land value implied from the site’s Mar 1, 2023 LBC rate.
Tay of JLL said non-landed residential land values are “beginning to cave in to downward pressure arising from an ever-growing list of dampening factors, the latest being April 2023’s punitive market cooling measures and the harmonisation of floor area definitions which took effect from Jun 1, 2023”. The harmonisation has reduced developers’ saleable area for condo projects.
Most property consultants, however, do not expect the downward adjustments in the non-landed residential LBC rates to stimulate the en bloc sale market.
Knight Frank’s Tay said: “The main hurdle to successful collective sales in the current market is the gulf between sellers’ price expectation and developers’ risk appetites.”
In similar vein, JLL’s Tay said: “LBC is but one of a string of factors affecting price expectations. Others with far more profound impact on price expectations include market cooling measures which tend to raise replacement cost for sellers, thus raising their asking prices for the land. At the same time, the cooling measures also tend to cool home buying and moderate price growth potential, thus dampening developers’ bid prices for sites.”
Buoyant shophouse market
For the commercial use group, LBC rates have increased in 12 sectors by between 3 per cent and 4 per cent, with no changes in the remaining 106 sectors. The sectors that saw hikes include Chinatown, Boat Quay, Kampong Glam, Lavender, Rangoon Road, Little India and Balestier. “We believe the increases were due to the buoyant shophouse transactions, and signal the resilience of commercial property values, despite higher financing costs and macroeconomic weakness,” said Tricia Song, head of research for Singapore and South-east Asia at CBRE.
In the hotel/hospital use group, LBC rates were increased in 116 sectors by 2.5 per cent to 5.1 per cent with no changes in the other two sectors. The biggest gains of around 5 per cent were seen in 11 sectors. These include areas such as Hill Street, Rochor Road, Raffles Avenue, Fullerton Road, Marina Bay Sands, Stevens Road, Cairnhill Road, Orchard Road, Somerset Road and Orchard Boulevard. The 11 sectors also include locations such as Claymore, Tanglin, Cuscaden and Grange Roads and Sentosa.
Said Song: “With a lack of hotel transactions, the broad-based increase is driven by the strong recovery in hotel room rates and occupancy.”
Market watchers were generally surprised that LBC rates for landed residential use have been left untouched. JLL’s Tay noted all three development land deals in the segment that took place during the LBC review period ending in August 2023 were at significant premiums to their land prices imputed from the Mar 1, 2023 landed residential LBC rates. The three deals were 10/10A/12 Chancery Hill Road and 14/14A Dyson Road; Kew Lodge, a landed site along Kheam Hock Road; and the Kew Drive site in the Bedok area.
“LBC rates for the landed residential use group have been kept unchanged, likely in response to the moderated demand and price growth during the six-month review period ending in August 2023 following the fresh round of market cooling measures. The Urban Redevelopment Authority’s property price index for landed homes rose by a sharply slower 1.1 per cent quarter on quarter in Q2 2023 compared with the 5.9 per cent rise in Q1 2023.
Under the Land Betterment Charge Act, which took effect on Aug 1, 2022, charges for the enhancement of land value were consolidated under the SLA. The LBC regime replaced the development charge, temporary development levy, and differential premium regimes. The DC Table of Rates were correspondingly replaced with the LBC Table of Rates, which will continue to be revised on a half-yearly basis.
https://www.businesstimes.com.sg/property/cut-land-betterment-charge-rates-non-landed-housing-not-expected-lift-en-bloc-deals
LBC rates raised by average of 0.4% for commercial use and 3% for hotel use; no change for all other uses including landed residential and industrial
Aug 31, 2023
FOR the first time in three years, the government has cut land betterment charge (LBC) rates for non-landed residential use.
However, most market watchers do not expect this to provide a fillip to the residential collective sale market due to bigger hurdles at play.
Developers pay an LBC for the right to enhance the use of some sites or to build bigger projects on them.
The government has reduced LBC rates for non-landed residential use by an average of 3.2 per cent for the period Sep 1, 2023 to Feb 29, 2024. This contrasts with a 0.3 per cent increase in the previous revision for the Mar 1 to Aug 31 period of this year.
However, for the use group that covers hotels and hospitals, LBC rates have gone up 3 per cent on average after being raised 1 per cent in the previous revision.
LBC rates for commercial use have inched up 0.4 per cent on average, after being left untouched in the previous revision.
There are no changes in LBC rates for landed residential and industrial uses, as well as for place of worship/civic and community institution use.
Also left untouched are the rates for the other use groups that cover open space/nature reserve, agriculture, and drains/roads/railways.
https://i.imgur.com/dg3SGZ1.png
The latest LBC rates were announced on Thursday (Aug 31), following a review by the Singapore Land Authority (SLA) in consultation with the taxman’s chief valuer (CV).
The LBC rates are based on the CV’s assessment of land values and take into consideration recent land sales. They are stated according to use groups across 118 geographical sectors in Singapore.
For non-landed residential use, the decreases in LBC rates were broad-based, with 111 geographical sectors seeing cuts ranging from 2.5 per cent to 11.1 per cent, with no changes for the remaining seven sectors. The largest drop of 11 per cent was in four sectors in the Marina Bay and surrounding areas.
JLL’s head of research and consultancy for Singapore, Tay Huey Ying, pointed to the recent state land tender closing for a site in Marina Gardens Lane which is zoned for residential, with commercial use at first storey. The plot drew four bidders, but only the top bid by the Kingsford Group was in line with expectations. “The remaining bidders approached the site with a cautious and opportunistic mindset,” she added.
In Sector 107, which includes the Upper Thomson area, the non-landed residential LBC rate was chopped by 6.3 per cent.
Knight Frank Singapore’s head of research, Leonard Tay, said: “This was likely due to the sole bid of S$985 per square foot per plot ratio for the site in Lentor Gardens at a state tender in April 2023, a rate lower than all the other Lentor state land tender sites that preceded it.”
JLL’s analysis showed that the unit land rate fetched for the site was 12 per cent below the land value implied from the Mar 1, 2023 non-landed residential LBC rate for Sector 107.
Likewise, the non-landed residential site in Jalan Tembusu in Sector 92 was recently awarded to the top bidder at a land rate 23 per cent lower than the land value implied from the site’s Mar 1, 2023 LBC rate.
Tay of JLL said non-landed residential land values are “beginning to cave in to downward pressure arising from an ever-growing list of dampening factors, the latest being April 2023’s punitive market cooling measures and the harmonisation of floor area definitions which took effect from Jun 1, 2023”. The harmonisation has reduced developers’ saleable area for condo projects.
Most property consultants, however, do not expect the downward adjustments in the non-landed residential LBC rates to stimulate the en bloc sale market.
Knight Frank’s Tay said: “The main hurdle to successful collective sales in the current market is the gulf between sellers’ price expectation and developers’ risk appetites.”
In similar vein, JLL’s Tay said: “LBC is but one of a string of factors affecting price expectations. Others with far more profound impact on price expectations include market cooling measures which tend to raise replacement cost for sellers, thus raising their asking prices for the land. At the same time, the cooling measures also tend to cool home buying and moderate price growth potential, thus dampening developers’ bid prices for sites.”
Buoyant shophouse market
For the commercial use group, LBC rates have increased in 12 sectors by between 3 per cent and 4 per cent, with no changes in the remaining 106 sectors. The sectors that saw hikes include Chinatown, Boat Quay, Kampong Glam, Lavender, Rangoon Road, Little India and Balestier. “We believe the increases were due to the buoyant shophouse transactions, and signal the resilience of commercial property values, despite higher financing costs and macroeconomic weakness,” said Tricia Song, head of research for Singapore and South-east Asia at CBRE.
In the hotel/hospital use group, LBC rates were increased in 116 sectors by 2.5 per cent to 5.1 per cent with no changes in the other two sectors. The biggest gains of around 5 per cent were seen in 11 sectors. These include areas such as Hill Street, Rochor Road, Raffles Avenue, Fullerton Road, Marina Bay Sands, Stevens Road, Cairnhill Road, Orchard Road, Somerset Road and Orchard Boulevard. The 11 sectors also include locations such as Claymore, Tanglin, Cuscaden and Grange Roads and Sentosa.
Said Song: “With a lack of hotel transactions, the broad-based increase is driven by the strong recovery in hotel room rates and occupancy.”
Market watchers were generally surprised that LBC rates for landed residential use have been left untouched. JLL’s Tay noted all three development land deals in the segment that took place during the LBC review period ending in August 2023 were at significant premiums to their land prices imputed from the Mar 1, 2023 landed residential LBC rates. The three deals were 10/10A/12 Chancery Hill Road and 14/14A Dyson Road; Kew Lodge, a landed site along Kheam Hock Road; and the Kew Drive site in the Bedok area.
“LBC rates for the landed residential use group have been kept unchanged, likely in response to the moderated demand and price growth during the six-month review period ending in August 2023 following the fresh round of market cooling measures. The Urban Redevelopment Authority’s property price index for landed homes rose by a sharply slower 1.1 per cent quarter on quarter in Q2 2023 compared with the 5.9 per cent rise in Q1 2023.
Under the Land Betterment Charge Act, which took effect on Aug 1, 2022, charges for the enhancement of land value were consolidated under the SLA. The LBC regime replaced the development charge, temporary development levy, and differential premium regimes. The DC Table of Rates were correspondingly replaced with the LBC Table of Rates, which will continue to be revised on a half-yearly basis.
https://www.businesstimes.com.sg/property/cut-land-betterment-charge-rates-non-landed-housing-not-expected-lift-en-bloc-deals