Residential development charges up

http://www.businesstimes.com.sg/sub/...73904,00.html?

Published February 24, 2010

DC rates may rise and affect en bloc sales

Consultants expect rates for residential use to climb 5-10%

By KALPANA RASHIWALA


(SINGAPORE) Development charges, which are paid to enhance or intensify the use of some sites, are headed north for residential use at the upcoming DC rate revision effective March 1, say property consultants.

They cite the increase in private home values since last year as well as aggressive land bids for residential sites at state tenders in the past six months.

On average, DC rates for landed and non-landed residential use could rise about 5 to 10 per cent. However, consultants are predicting that rates for commercial, industrial and hotel use could remain flat.

The upcoming DC rate revision will also be monitored by those trying to embark on collective sales, especially for sites whose redevelopment would involve sizeable DC payment. DC is part of total land cost to a developer. If the DC rate increases significantly and the value of the site remains constant, the developer will offer owners less for the site, explains CB Richard Ellis executive director Jeremy Lake.

'The problem today is that there's already a price gap between owners' and developers' expectations. This will be compounded if there's a significant hike in DC rates, in the case of sites with a significant DC component. The current environment (of rising private residential price expectations) is not conducive to owners reducing asking prices,' he adds.

'Hence for en bloc sites with significant DC component, the exposure to DC volatility can be very unhelpful in a rising market, whereas sites with zero or low DC component are fairly immune to DC volatility and those are good sites to work on.' Mr Lake reckons that the next DC rate revision on Sept 1 may be more keenly watched - than the March 1 update - as a higher number of en bloc sale efforts are likely to be at a more advanced stage then.

DC rates - which are 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 International is projecting 8 to 10 per cent rise in average DC rates for non-landed residential use from March 1. The biggest hikes of up to 20 per cent are likely to be in places like Serangoon Avenue 3, Upper Thomson Road and Sengkang West Avenue where winning land bids at state tenders have been at substantial premiums of 48-86 per cent to land values imputed from the Sept 1, 2009 DC rates for these geographical sectors, says the firm's director Tay Huey Ying.

Suburban locations could see a bigger rise in DC rates than upmarket locations as last year's rebound in home sales and prices was led by the mass market segment, she argues.

Private-sector land deals too point to higher DC rates. For instance, the Parisian site at Angullia Park was sold in October at $2,058 psf per plot ratio - about 70 per cent above the DC-rate implied land value for the area.

DTZ's SE Asia research head Chua Chor Hoon reckons that non-landed DC rates will go up 15 to 25 per cent from March 1. Jones Lang LaSalle's associate director (research and consultancy) Desmond Sim predicts 10-15 per cent hikes in non-landed residential DC rates in mass-market suburban locations, outpacing a 5-8 per cent rise in prime districts.

As for landed residential DC rates, he forecasts a 10-15 per cent increase across all geographical sectors, with a bigger increase likely for Sentosa Cove and Good Class Bungalow Areas.

CB Richard Ellis executive director Li Hiaw Ho notes that the official price indices for detached, semi-detached and terrace houses rose 20-odd per cent from July to December 2009. In addition, 2009 saw the highest total value of GCB sales at $1.64 billion. He forecasts an average 5-10 per cent rise this round for landed rates.

Mr Li forecasts DC rates for commercial and industrial use will remain unchanged or even fall very marginally.

Colliers's Ms Tay, who is projecting an up to 5 per cent climb in average DC rate for industrial use, says: 'The government is unlikely to make significant upward adjustments to DC rates for industrial use group in general in the upcoming review given the nascent recovery of the manufacturing sector and the industrial property market. Also, JTC Corp industrial land rents have not been adjusted since they were revised downward in January 2009, says Ms Tay.

She reckons commercial DC rates will remain largely unchanged as office rents have remained weak.

http://www.businesstimes.com.sg/sub/...74431,00.html?

Published February 27, 2010

DC rates take striking hike in scenic Sentosa

RWS effect reflected in higher land values on island while interesting trend emerges in CBD

By KALPANA RASHIWALA


SENTOSA has seen a big jump in development charge (DC) rates, reflecting higher land values on the island following this month's opening of Resorts World Sentosa (RWS).

On average, the government is raising DC rates (payable for intensifying or enhancing the use of some sites) about 12 per cent for landed residential use from March 1; but in Sentosa, they will climb 17.3 per cent. For non-landed residential use, Sentosa saw a 10 per cent hike in DC rates compared to the average rise of about 8 per cent. And while DC rates for commercial use will be cut roughly 2 per cent on average against the backdrop of weak office rentals, Sentosa is the only location where they will be raised - to the tune of 12.5 per cent.

It is also the only location where the government increased the hotel-use DC rate; the hike was 12.2 per cent. In all other locations, the DC rate for hotel use (which also covers hospitals) was left untouched.

DC rates - which are revised on March 1 and Sept 1 each year - are specified by use groups across 118 geographical sectors throughout Singapore. The review is conducted by the Ministry of National Development in consultation with the Chief Valuer, who takes into account current market values.

Some analysts pointed to an interesting trend emerging in the Central Business District. DC rates for commercial use in the CBD fell further while non-landed residential rates rose and actually surpassed the commercial rates. This could mean paying a higher DC for those who redevelop old CBD office blocks into apartments and could impact such conversions, especially in the case of 99- year leasehold sites as their owners would also want a lease top- up, says DTZ's South- east Asia research head Chua Chor Hoon.

Jones Lang LaSalle's SE Asia research head Chua Yang Liang goes a step further, predicting that the new trend could have an 'unexpected effect of encouraging the redevelopment of existing older office stock into the same office use and discouraging conversions to residential'. Jones Lang LaSalle's (JLL) analysis showed that DC rates for non-landed residential use were raised for 116 geographical sectors and left unchanged for the remaining two areas.

The biggest hike of 15.4 per cent was seen in three sectors: 91 (which covers the Mountbatten, Meyer and Broadrick areas); 98 (Tampines, Bedok Reservoir, Bedok North, Kembangan); and 101 (Paya Lebar Way/Eunos/Sims Avenue).

This was followed by Sector 76 (Everton/Spottiswoode Park) with a 14.5 per cent increase. Market watchers attribute this to last October's en bloc sale of Dragon Mansion at a land price about 68 per cent above the land value implied by the prevailing Sept 1, 2009 DC rate for the location.

Also, the geographical sectors covering Serangoon Ave 3, Upper Thomson Rd and Sengkang West Avenue - where residential sites have been sold at bullish prices at state tenders in the past six months - were raised 12.5 per cent, 10.5 per cent and 9.1 per cent respectively.

Colliers International executive director (investment sales) Ho Eng Joo said that overall, the growth in non-landed residential DC rates may hamper developers' landbanking plans, especially for collective sales sites that require DC payment.

Credo Real Estate managing director Karamjit Singh, however, said yesterday: 'Three quarters of the en bloc projects our company is working on don't involve any DC payment. As for the rest, DC as a component of the entire land cost is not very high and hence the increase in DC rates will have minimal impact on the en bloc sale exercise.'

For landed residential use too, charges were raised in 116 sectors and left unchanged in the other two.

Besides Sentosa, other areas with the biggest hikes include Holland/Dunearn Rd/Sixth Avenue (up 17.1 per cent) as well as the Good Class Bungalow areas of Botanic Gardens/Gallop Rd/Tyersall and Ridout/Peirce Hill/Swettenham Road (each up 16.9 per cent), JLL's analysis shows.

Commercial DC rates were trimmed between 3.2 and 13.3 per cent in 23 sectors. The biggest chop was in the Cecil St/Robinson Road area. There were also cuts in other parts of the financial district, such as Marina Bay, Raffles Place and Fullerton Road, as well as in the Thomson/Moulmein, Newton Circus, Bugis and Tanglin/Cuscaden areas.

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http://www.straitstimes.com/Money/St...ry_495590.html

Feb 27, 2010

Residential development charges up

New rates reflect improved property market, but commercial site fees dip

By Joyce Teo


THE improved property market has prompted the Government to raise the fees developers pay to enhance the use of residential sites.

The fee - called a development charge (DC) - closely reflects recent land and property values as it is adjusted every six months.

A developer pays a DC if he wants to intensify the use of a site, for instance, by redeveloping an existing project into a bigger one.

Rising values - and developers bidding aggressively for suburban residential land - have forced the Government's hand, although the increases were mostly within expectations.

From next Monday, the DC will go up by about 12 per cent on average for landed homes and around 8 per cent for non-landed properties. But the rate for commercial sites has dipped given the muted market.

The new rates highlight the rapid rebound in residential property. The DC for landed homes had not been revised for two years, while the non-landed rate was down 2 per cent six months ago.

Experts say the higher charges will add to developers' costs and could affect collective or en bloc sales and the conversion of office buildings to residential use.

The DC rises vary across the island.

While the average rise for landed properties is 12 per cent, the DC will jump by around 17 per cent in the prime areas of Tanglin, Holland and Bukit Timah, the HDB towns of Hougang, Toa Payoh and Ang Mo Kio, and Sentosa.

The DC for Sentosa rose the most - by 17.3 per cent - this round, supported by the recent strong transaction volume in that area, said Jones Lang LaSalle.

The largest rise in the non-landed homes sector will be a hike of 15 per cent in the mass-market areas of Mountbatten and Katong, as well as in Paya Lebar, Eunos, Bedok North, Simei and Tampines.

The central areas of Spottiswoode Park and Cantonment, Orchard Road and Sentosa Island also saw double-digit rises, because of surging prices and some recent land acquisition activity.

'Overall, the rise in non-landed residential (development charge) rates is expected to add to developers' land banking costs - particularly for collective sale sites that require payment (of the charge),' said Colliers International's executive director of investment sales, Mr Ho Eng Joo.

This may hamper or derail their land banking plans, he added.

It is a different story in the commercial sector, where DCs will go down 2 per cent on average, with the exception of booming Sentosa, where the rate will go up by 13 per cent.

Rates will fall by up to 13.3 per cent around Raffles Quay and Shenton Way.

The dip for commercial property will be welcomed. The office sector has been subdued, land sales during the review period have been muted and the business environment is still uncertain despite signs of recovery, said Colliers International.

The Central Business District (CBD) will also see the completion of about 2.2million sq ft of office space this year, raising the real threat of a damaging oversupply.

'A cut in DC rates in these locations will hence provide the necessary stabilising effect to the market, amid daunting concerns about the potential supply,' said Mr Ho.

Consultants also noted that the fall in commercial DC rates in the CBD will be met with a rise in residential rates.

'This would affect the conversion of office buildings to residential uses in the CBD, especially those on leasehold land as they would also have to top up the lease,' said DTZ's head of South-east Asia research, Ms Chua Chor Hoon.

There are a number of players that are keen to convert and they will have to recalculate their sums as the DC rates have increased, said Mr Ho.

Sentosa is the only area of the country that registered a rise - of 12 per cent - in the DC for the hotel and hospital sector, which will remain untouched everywhere else.

Sentosa is paying the price of the integrated resort, which has pushed up values and, hence, the DC increases in the landed residential, commercial and hotel/hospital sectors, said Ms Chua.

The National Development Ministry sets the rates every March and September in consultation with the Chief Valuer.

[email protected]

Quote:

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Originally Posted by mr funny

http://www.straitstimes.com/Money/St...ry_495590.html

Feb 27, 2010

Residential development charges up

New rates reflect improved property market, but commercial site fees dip

By Joyce Teo


THE improved property market has prompted the Government to raise the fees developers pay to enhance the use of residential sites.

The fee - called a development charge (DC) - closely reflects recent land and property values as it is adjusted every six months.

A developer pays a DC if he wants to intensify the use of a site, for instance, by redeveloping an existing project into a bigger one.

Rising values - and developers bidding aggressively for suburban residential land - have forced the Government's hand, although the increases were mostly within expectations.

From next Monday, the DC will go up by about 12 per cent on average for landed homes and around 8 per cent for non-landed properties. But the rate for commercial sites has dipped given the muted market.

The new rates highlight the rapid rebound in residential property. The DC for landed homes had not been revised for two years, while the non-landed rate was down 2 per cent six months ago.

Experts say the higher charges will add to developers' costs and could affect collective or en bloc sales and the conversion of office buildings to residential use.

The DC rises vary across the island.

While the average rise for landed properties is 12 per cent, the DC will jump by around 17 per cent in the prime areas of Tanglin, Holland and Bukit Timah, the HDB towns of Hougang, Toa Payoh and Ang Mo Kio, and Sentosa.

The DC for Sentosa rose the most - by 17.3 per cent - this round, supported by the recent strong transaction volume in that area, said Jones Lang LaSalle.

The largest rise in the non-landed homes sector will be a hike of 15 per cent in the mass-market areas of Mountbatten and Katong, as well as in Paya Lebar, Eunos, Bedok North, Simei and Tampines.

The central areas of Spottiswoode Park and Cantonment, Orchard Road and Sentosa Island also saw double-digit rises, because of surging prices and some recent land acquisition activity.

'Overall, the rise in non-landed residential (development charge) rates is expected to add to developers' land banking costs - particularly for collective sale sites that require payment (of the charge),' said Colliers International's executive director of investment sales, Mr Ho Eng Joo.

This may hamper or derail their land banking plans, he added.

It is a different story in the commercial sector, where DCs will go down 2 per cent on average, with the exception of booming Sentosa, where the rate will go up by 13 per cent.

Rates will fall by up to 13.3 per cent around Raffles Quay and Shenton Way.

The dip for commercial property will be welcomed. The office sector has been subdued, land sales during the review period have been muted and the business environment is still uncertain despite signs of recovery, said Colliers International.

The Central Business District (CBD) will also see the completion of about 2.2million sq ft of office space this year, raising the real threat of a damaging oversupply.

'A cut in DC rates in these locations will hence provide the necessary stabilising effect to the market, amid daunting concerns about the potential supply,' said Mr Ho.

Consultants also noted that the fall in commercial DC rates in the CBD will be met with a rise in residential rates.

'This would affect the conversion of office buildings to residential uses in the CBD, especially those on leasehold land as they would also have to top up the lease,' said DTZ's head of South-east Asia research, Ms Chua Chor Hoon.

There are a number of players that are keen to convert and they will have to recalculate their sums as the DC rates have increased, said Mr Ho.

Sentosa is the only area of the country that registered a rise - of 12 per cent - in the DC for the hotel and hospital sector, which will remain untouched everywhere else.

Sentosa is paying the price of the integrated resort, which has pushed up values and, hence, the DC increases in the landed residential, commercial and hotel/hospital sectors, said Ms Chua.

The National Development Ministry sets the rates every March and September in consultation with the Chief Valuer.

[email protected]

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can anyone help ?

taking as example DC for landed is raised 10 pct ..

what does it mean to buyer of old landed house, who plans to rebuild , adding its buildup by 50 pct ?

what does it mean to existing owner of new landed house? can he know raise his selling price by 10 pct ?

Governmenment raise DC rates on the one hand and impose cooling measures on the property market on the other hand. Developers have to pass the cost to home buyers due to increase in DC rates so isnt it a vicious cycle of continous price increase spurred on by the govt? :doh: :doh:

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Originally Posted by Regulators

Governmenment raise DC rates on the one hand and impose cooling measures on the property market on the other hand. Developers have to pass the cost to home buyers due to increase in DC rates so isnt it a vicious cycle of continous price increase spurred on by the govt? :doh: :doh:

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so who makes the money ? GOVT

thats a very very smart way of taking back money ..

tax one at 25pct max..claiming to be one of the lowest in the world ...then take back from other areas ... like COE, ERP..and now DC ...and all these measures all fail to achieve what they were meant to .. except to make money for you know who ... who needs it to pay their million salary .....

Quote:

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Originally Posted by Regulators

Governmenment raise DC rates on the one hand and impose cooling measures on the property market on the other hand. Developers have to pass the cost to home buyers due to increase in DC rates so isnt it a vicious cycle of continous price increase spurred on by the govt? :doh: :doh:

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Agree that it will be passed on to the buyers eventually when the buyers bite at the price that the developers are selling.

The increase is quite substantial... 12%... However, DC in proportion to the total fixed and variable cost of developing a property may not as significant and the final end sales price increased may be just at a net gain of 1% to 5%. It is definitely not going to be a direct 12% increase if developers hold their profit margin as constant. This is nothing compared to developer's profit margins...they can also cut back on the construction costs by giving cheaper finishings (i.e. no marble or granite floorings, cheapo wood work and lesser or no basement carparks.)

What this measure would result is that it raises the baseline pricing of new developments as they would be more expansive to develop now. Perhaps also take a little heat out from the enblock fever.

I view it as such
1. Increase DC so as to please developers (as their current holdings are cheaper than future developments - give them a chance to clear stock before the Great Singapore Sale if there is ever going to be one)
2. Introduce cooling measures to please Singaporean voters (housing and affordability are election issues - at least the voters would be happier to know that the Government is doing something to please them)

The difficult job of the governement is to decide who to please more.... Interestingly, sometimes it appears that they pleased developers more while at times it appears that the are truely trying to please Singaporeans. It can be confused altogether also... Just hope that it is not a case where everybody is not pleased.

The "little red dot" should never be turned into a sea of red (negative equity)....

good observation, condorich. to those already vested in the named areas with dc hikes, it can only be good as it means less crowding and higher corelating sale price increase potential.