Property charge hike not meant to cool collective sale fever: Mah

July 22, 2007

En bloc frenzy not behind rise in development charge


THE Minister for National Development, Mr Mah Bow Tan, explained on Sunday that the Government's recent move to raise development charges was not a reaction to the current collective sale frenzy.

Rather, the move was because the 'property market is now booming' and it was 'timely to return' to the position before 1985 when the market went down and there was a recession.

The Government announced the increase, from 50 per cent to 70 per cent of the rise in value, on Wednesday.

Mr Mah called it 'a sharing of the gains and of the increase in value of the land as a result of the Government?s planning approval'.

Some of the increase in revenue will be used to provide infrastructure such as roads, rail and power.

Mr Mah was speaking to reporters after an event for at-risk youths organised by the north-east mosque cluster in Tampines on Sunday morning.

Though the move could affect some collective sale developments, he felt the overall impact was likely to be minimal.

He assured the public that the Government was closely monitoring the property market and the balance between supply and demand.

If supply falls short, it will step up its land sales programme.

On rising rental rates, he said there had been reports of reasonable prices still being asked in good areas.

The high prices, he said, were generally due to people focusing on particular properties.

Read the full report in Monday's edition of The Straits Times.

Rise in land development charge will allow fair sharing of property gains

By Ng Baoying, Channel NewsAsia | Posted: 22 July 2007 2106 hrs


SINGAPORE : The primary intention of the land development charge increase is not to slow down the frenzied property market.

National Development Minister Mah Bow Tan says the aim is to facilitate a fair sharing of the enhancement in the value of the land.

Last Wednesday, the government announced an increase in the land development charge from 50 to 70 per cent.

Experts were split, with some saying it would slow down the en bloc sales frenzy as developers would have to fork out more for land.

This would in turn stem rising rental costs as fewer redevelopments mean fewer apartments torn down.

But others said the bullish market sentiments would override that.

Weighing in, the National Development Minister says the impact on en bloc sales will be minimal and underlines the rationale behind the charge.

He says: "The development charge is to take some of that increase in value to go and improve the infrastructure. Roads, rail, power, whatever. Because you know when you increase the plot ratio - build more flats, build to a higher level - you need to provide the infrastructure. So that's what the development charge is. You could say it's a tax on the increase in the value as a result of government action."

So depending on the stipulated land use, some projects may not be affected.

Mr Mah says: "When you look at the different en bloc sales you'll realise that some en bloc sales actually do not incur development charge at all, partly because they are actually able already to develop up to a higher intensity. So, the government doesn't have to go in and change the planning parameters."

He notes that a recession in 1985 led to the downward revision of the land development charge.

But now that the property market has more than recovered, it is time to reinstate things.

Mr Mah says: "It's what we feel to be a fair share of the enhancement of the value of the land. So that's why during this time, the market is healthy, we decided it's timely for us to go back to the original."

He says the current squeeze will only last a short while as he expects ample supply to come in over the next 2 or 3 years in various categories.

And to further ensure smooth functioning of the market, there should be comprehensive information sharing by analysts and developers.

He says: "This is not just government coming out with such information. I think developers and analysts should also make it a point when they put out information that they should put it out based on facts, not based on speculation. And if they do publish information based on their own analysis of the situation, I think it's important for them to upfront say so, so that people know."

"It's not just the government agencies putting out information. It's very important to make sure that you keep publishing out this information so everybody knows, so they don't get spooked, panicked by one particular headline, one report in the papers about record prices here or record rentals there."

In all, Mr Mah says the property market will continue to be monitored with sustainable growth in mind, and more land will be released through the government land sales programme if necessary. - CNA/ch

Published July 23, 2007

DC hikes will help boost infrastructure, says Mah

He reiterates that the 40% increase was not to cool the property market

By ROLAND LIM


(SINGAPORE) National Development Minister Mah Bow Tan yesterday pointed out that not all en bloc sales will be affected by the development charge (DC) hike announced last week and reiterated that the main aim of the hike was not to cool the property market.

The government raised DC rates by 40 per cent last Wednesday, to 70 per cent from 50 per cent of the appreciation in land value arising from enhancing the use of a site.

Mr Mah told Channel NewsAsia: 'When you look at the different en bloc sales, you'll realise that some en bloc sales actually do not incur development charge at all, partly because they are actually able already to develop up to a higher intensity. So, the government doesn't have to go in and change the planning parameters.'

The minister added that the impact on en bloc sales would be minimal and reiterated that the DC hike was to 'take some of that increase in value to go and improve the infrastructure'. 'Because you know when you increase the plot ratio - build more flats, build to a higher level - you need to provide the infrastructure. So that's what the development charge is. You could say it's a tax on the increase in the value as a result of government action.'

The government had earlier explained that the DC increase was to enable more equitable sharing of gains between land owners and the state.

Mr Mah noted that the recession in 1985 had led the government to reduce the DC, but with the property market recovery, the government has decided 'it's timely for us to go back to the original'.

The minister also said that the government would continue to monitor the property market and release more land via the government's land sales programme if required.

Meanwhile, he expects an amply supply of properties in all categories to be available over the next two or three years to ease the current shortage.

July 23, 2007

Property charge hike not meant to cool collective sale fever: Mah

Minister says overall impact of higher DC is likely to be minimal

By Maria Almenoar


THE Government's recent move to raise development charges (DC) was not a reaction to the current collective sale fever, the Minister for National Development, Mr Mah Bow Tan, explained yesterday.

Rather, the move is because the 'property market is now booming' and it is 'timely to return' to the position before 1985 when the market went down and a recession ensued, said the minister.

Though the move could affect some collective sale developments, Mr Mah said the overall impact is likely to be minimal.

In a surprise move last Wednesday, the Government raised the tax it levies on property redevelopment - from 50 per cent to 70 per cent of the rise in land value - similar to what it was in 1985.

This DC is payable only if the developer is building a bigger project on the land.

Some market observers have said the move has abruptly cooled a sizzling market, especially for collective sales, and shifted market sentiment - although the government agency in charge has said that this was not the intention.

There were also worries - especially among those hoping to sell their properties en bloc - that the DC hike might just be the first of more such cooling measures from the Government.

Market watchers spoke of expecting 'a second whammy' on Sept 1 when the Government is expected to announce higher DC rates under its regular six-monthly review of the charges.

Analysts said last Wednesday's DC hike had already made some developments more attractive and others less so - depending on how high their DC component was.

Most of those affected would be 99-year leasehold properties outside prime areas such as the slew of privatised HUDC estates trying for a collective sale.

For these sites, the DC hike could add 6 per cent or more to the land cost, so developers would be inclined to offer less in a collective sale after taking into account the increased expenditure.

Mr Mah yesterday described the new DC rates as a 'a sharing of the gains and of the increase in value of the land as a result of the Government's planning approval'.

Some of the increase in revenue will be used to provide infrastructure such as roads, rail and power. 'When you increase the plot ratio, when you build more flats, when you build to a higher level, you need to provide the infrastructure,' he said.

Mr Mah was speaking to reporters after an event for at-risk youth organised by the north-east mosque cluster in Tampines.

He also assured the public that the Government was closely monitoring the property market and the balance between supply and demand. If supply falls short, it will step up its land sales programme.

He said: 'My assessment is, over the next two to three years, there will be ample supply coming into the market in various categories...But in the short term, within the one year or so, there may be an imbalance in supply-demand and some pressure on prices.'

On rising rental rates, Mr Mah said there had been reports of reasonable prices still being asked in good areas.

The high prices, he said, were generally due to people focusing on particular properties. He emphasised there were enough flats available for purchase or rental. Of the roughly 800,000 Housing Board flats, about 600,000 are eligible for rental under HDB rules.

Mr Mah said all parties - developers, analysts and the Government alike - need to make information about the market available to the general public.

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