Govt raises development charge from 50% to 70%
Govt raises development charge from 50% to 70%
Wed, Jul 18, 2007
AsiaOne
The government will revise the Development Charge (DC) for new building projects from 50 per cent to 70 per cent, in line with the buoyant property market.
The revised rates, which come into immediate effect, will apply to development applications where provisional permission is issued from today.
They will also apply to cases that are granted a second or subsequent extension to their provisional permission on or after this operative date.
A statement from the National Development Ministry today said the DC rates have been revised to reflect the appreciation in land value, and is a reinstatement of what it was in 1985.
The government reduced the DC from 70 per cent to 50 per cent in 1985 to avoid eroding the share of value enhancement to the developers in the then declining market due to the recession.
"With the current buoyant property market, the converse is true. Thus, the government has decided to reinstate the DC to its original rate at 70 per cent," said the ministry statement.
DC rates are set baced on the principle of sharing of enhanced land value. Currently, they are pegged at 50 per cent of the enhancement of value.
The current formula is based on an adjustment made during the 1985 recession.
The DC is levied when the land value of a site can be enhanced due to the government's rezoning of the site to a higher value use or increasing the plot ratio.
The DC system, where a part of the enhancement in land value is taxed, allows the State to have a share of the gains from the value enhancement arising from its grant of planning approval.
The portion of the gain taxed by the government can then be used to offset expenditure on infrastructure improvements, such as road and rail works, and utilities to support the higher land zoning or intensification of land.
The balance of the gain is retained by the owner and provides an incentive for him to undertake the development work.
The ministry statement says for land with title restrictions on the use and intensity, which are subject to a levy of differential premium by the Singapore Land Authority, the differential premium will similarly be adjusted to 70 per cent.
Re: Govt raises development charge from 50% to 70%
This will make newlaunch even more expensive???
Re: Govt raises development charge from 50% to 70%
Quote:
Originally Posted by Unregistered
This will make newlaunch even more expensive???
This may put a stop on the "irrational exuberance" behaviour on enbloc. Hope the price of those old and run down condos can go down to where it suppose to be soon. For those who bought those old condos with sky high prices, I guess you know it you were speculating, not investing and as such, I supposed you are very prepared to lose big times.
Re: Govt raises development charge from 50% to 70%
think this new news will kill all the enbloc in the suburbs. This is in line with the government supply side initiative where they want to control price rise in the suburbs to keep the man In the street happy. Increase developlment charge prob would not stop enbloc in prime areas where selling price of new projects is far higher than enbloc price + development charge. But in the suburbs like east esp the 99 years one with a high development charge the developers might as el go bid for land in the goverment land sales programme.
Re: Govt raises development charge from 50% to 70%
MND announces revision in development charge rates
Posted: 18 July 2007 1428 hrs
SINGAPORE: The Ministry of National Development has announced that development charge rates will be revised from the current 50 per cent of the appreciation in land value to 70 per cent.
The revised rates take effect immediately and apply to development applications where provisional permission is issued on or after 18 July.
The statement added that the development charge was lowered from 70 per cent to 50 per cent in 1985 to avoid eroding the share of value enhancement that accrued to developers in a declining market.
But with the current buoyant property market, the government has decided to reinstate the development charge to its original rate of 70 percent.
For land with title restrictions on the use and intensity, which are subjected to a levy of differential premium by the Singapore Land Authority, the differential premium will be similarly adjusted to the 70 per cent rate based on the published table of development charge rates.
- CNA/yy
Re: Govt raises development charge from 50% to 70%
July 18, 2007
Development charge for new buildings up to 70%
THE government has raised the Development Charge (DC) for new building projects to 70 per cent from 50 per cent.
The revised rates will apply to development applications where provisional permission is issued from Wednesday.
They will also apply to cases that are granted a second or subsequent extension to their provisional permission on or after this operative date.
A statement from the National Development Ministry (MND) on Wednesday said the DC rates have been revised to reflect the appreciation in land value, and is a reinstatement of what it was in 1985.
For land with title restrictions on the use and intensity, which are subject to a levy of Differential Premium by the Singapore Land Authority, it will similarly be adjusted to the 70% rate.
The land value of a site can be enhanced due to the government's action in rezoning the site to a higher value use or increasing the plot ratio.
The DC system, where a part of the enhancement in land value is taxed, allows the state to have a share of the gains from the value enhancement arising from its grant of planning approval.
The portion of the gain taxed by the government can then be used to offset expenditure on infrastructure movements, such as road and rail works, as well as utilities, to support the higher land zoning or intensification of land.
The balance of the gain is retained by the owner and provides and incentive for him to undertake the development work.
Re: Govt raises development charge from 50% to 70%
18 July 2007
Revision of Development Charge (DC)
The Ministry of National Development announced today that the Development Charge (DC) rates will be revised from the current 50% of the appreciation in land value to 70%.
The revised rates will be effective from 18 July 2007 and will apply to development applications where Provisional Permission is issued on or after this date. They will also apply to cases that are granted a second or subsequent extension to their Provisional Permission on or after this operative date.
Principle of Development Charge (DC)
The land value of a site can be enhanced due to the Government’s action in rezoning the site to a higher value use or increasing the plot ratio. The DC system, where a part of the enhancement in land value is taxed, allows the State to have a share of the gains from the value enhancement arising from its grant of planning approval.
The portion of the gain taxed by the Government can then be used to offset expenditure on infrastructure improvements, such as road and rail works, and utilities, to support the higher land zoning or intensification of land. The balance of the gain is retained by the owner and provides an incentive for him to undertake the development work.
Revision of the Development Charge rates
DC rates are set based on the principle of sharing of enhanced land value. Currently, DC rates are pegged at 50% of the enhancement of value. The current sharing formula of 50/50 is a result of an adjustment made during the recession in 1985. The DC was lowered from 70% to 50% in 1985 to avoid eroding the share of value enhancement that accrued to developers in a declining market. With the current buoyant property market, the converse is true. Thus, the Government has decided to reinstate the DC to its original rate at 70%.
For land with title restrictions on the use and intensity, which are subject to a levy of Differential Premium by the Singapore Land Authority, the Differential Premium will similarly be adjusted to the 70% rate based on the published Table of DC rates.
For media enquiries, please contact Ms Ang Hwee Suan of URA at Tel: 63218134 on DC matters and Ms Susan Koh of SLA at Tel: 63238105 on Differential Premium matters.
Issued by the Ministry of National Development
For media enquiries, please contact:
Ms Gillian Tan
Manager, Public Relations
DID: 6321 8280
Email: [email protected]
Re: Govt raises development charge from 50% to 70%
Quote:
Originally Posted by Unregistered
This will make newlaunch even more expensive???
So existihg property prices will go up with this measure!
Re: Govt raises development charge from 50% to 70%
Quote:
Originally Posted by Unregistered
So existihg property prices will go up with this measure!
Probably not because the measure will make it riskier for developer to buy en-bloc at a higher price. So less enbloc (except maybe prime areas) and the property market will cool down. It's like putting a capital gain tax on flippers, and this will stop some flippers from even thinking of flipping because it is too risky. When the market goes down, you stand to lose much more - can bankrupt the developer.
Re: Govt raises development charge from 50% to 70%
can someone give an example of how this raises the cost to developers?
Re: Govt raises development charge from 50% to 70%
Quote:
Originally Posted by Unregistered
This may put a stop on the "irrational exuberance" behaviour on enbloc. Hope the price of those old and run down condos can go down to where it suppose to be soon. For those who bought those old condos with sky high prices, I guess you know it you were speculating, not investing and as such, I supposed you are very prepared to lose big times.
Those who are asking for High price enbloc price will soon regret not to sell at a more reasonable bid price by developers.
Those grangeford owner who are asking for $2100 psf will regret not to sell at $1800 offered by lippo.
The pacific mansion owners who are asking for rediculous $2300 psf will soon be begging for developers to buy at discount.
But newly launch condos will rise due to few availability of land.
Re: Govt raises development charge from 50% to 70%
Quote:
Originally Posted by Unregistered
Those who are asking for High price enbloc price will soon regret not to sell at a more reasonable bid price by developers.
Those grangeford owner who are asking for $2100 psf will regret not to sell at $1800 offered by lippo.
The pacific mansion owners who are asking for rediculous $2300 psf will soon be begging for developers to buy at discount.
But newly launch condos will rise due to few availability of land.
It would be inetresting to see whether those residents who file lawsuits to invalid the enbloc sale agreement thinking the price were too low, including those at Horizon Towers, are now willing to change mind to withdraw their lawsuits
Re: Govt raises development charge from 50% to 70%
Quote:
Originally Posted by Unregistered
Those who are asking for High price enbloc price will soon regret not to sell at a more reasonable bid price by developers.
Those grangeford owner who are asking for $2100 psf will regret not to sell at $1800 offered by lippo.
The pacific mansion owners who are asking for rediculous $2300 psf will soon be begging for developers to buy at discount.
But newly launch condos will rise due to few availability of land.
The enbloc fever is the most potent force in inducing the frenzy in the market recently as it has an effect the upsurge in enbloc will cause a vicious cycles in driving up property price due to the following reasons:
1. Due to long depressed market, ready supply of units have been tight and would not be able to meet the surge in demand in the near term due to an influx of foregniers in the next two years (but in 3-4yrs, there will be oversupply of units as govt will step up in releasing land)
2. Enbloc will reduce the supply further (but in 3-4 yrs time, number of units will be doubled on each of the enbloc land)
3. Folks who gets the windfalls from enbloc will be flushed with cash and this will fuel the sentiments of a lot of wealthy folks are on the lookout for units, further aggravate the fear in "would-be-buyers".
If the euphoria associated with enbloc can be arrested, the vicious cycle of greed and fear is going to stall and it is only logical to predict the spiral climb of property price will be arrested immediately.
Re: Govt raises development charge from 50% to 70%
Quote:
Originally Posted by Unregistered
The enbloc fever is the most potent force in inducing the frenzy in the market recently as it has an effect the upsurge in enbloc will cause a vicious cycles in driving up property price due to the following reasons:
1. Due to long depressed market, ready supply of units have been tight and would not be able to meet the surge in demand in the near term due to an influx of foregniers in the next two years (but in 3-4yrs, there will be oversupply of units as govt will step up in releasing land)
2. Enbloc will reduce the supply further (but in 3-4 yrs time, number of units will be doubled on each of the enbloc land)
3. Folks who gets the windfalls from enbloc will be flushed with cash and this will fuel the sentiments of a lot of wealthy folks are on the lookout for units, further aggravate the fear in "would-be-buyers".
If the euphoria associated with enbloc can be arrested, the vicious cycle of greed and fear is going to stall and it is only logical to predict the spiral climb of property price will be arrested immediately.
The psychology in property market in the last six months is exactly like stock market, but just with much as fundamentals to support its rapid rise. I think the current measure should be a wake up call to all. Luckily, the percentage of homes tranacted at record prices (in comparison to one year ago) are rather limited and should not have a big impact to encomy even if the price drop back to Jan level
Re: Govt raises development charge from 50% to 70%
Quote:
Originally Posted by Unregistered
Those who are asking for High price enbloc price will soon regret not to sell at a more reasonable bid price by developers.
Those grangeford owner who are asking for $2100 psf will regret not to sell at $1800 offered by lippo.
The pacific mansion owners who are asking for rediculous $2300 psf will soon be begging for developers to buy at discount.
But newly launch condos will rise due to few availability of land.
The recent property frenzy is driven by sentiment far more than fundamental, when the sentiment turns, the party is pretty much over and newly launched condos will not be spared. This is especially true to mass condo projects. There are plenty of availabilty of lands and it will get worse when more lands have already been scheduled to be released soon.
Re: Govt raises development charge from 50% to 70%
Will Farrer Court be affected by this new measure ?
Has their development applications been given provisional permission ?
Re: Govt raises development charge from 50% to 70%
Quote:
Originally Posted by Unregistered
Will Farrer Court be affected by this new measure ?
Has their development applications been given provisional permission ?
It takes quite a few months to complete the formalities including getting approval from starta board etc. I doubt developer has even start applying for redevelopment. However, because Farrer court is in prime location, I doubt developer will back out the deal, but most likely the owner will get less because of the increase in both development charge and charges to top up the lease to 99yr
One wild card though: if the property market turns south rapidly in the next few months, similar to the short-lived, but sharp spike in 2001, developer may decide to walk away the deal if they think they can't market the project at the level that would be profitable
Re: Govt raises development charge from 50% to 70%
Quote:
Originally Posted by Unregistered
Will Farrer Court be affected by this new measure ?
Has their development applications been given provisional permission ?
I think en bloc that have been dealed before July 18 will enjoy the 50% DC.
But any enbloc that is dealed from today onward will have a 70% DC.
So I think farrer court will enjoy the old 50% DC.
This increase will affect the lower end sector, but for high end, I think it wont affect that much.
Re: Govt raises development charge from 50% to 70%
July 18, 2007
Development charge for new buildings up to 70%
THE Government has raised the Development Charge (DC) for new building projects to 70 per cent from 50 per cent.
A land development charge is levied on developers when there is an increase in the value of land site due to rezoning.
For example, if the rise in land value for a site works out to $2.4 million, the DC payable on this site would be $1.2 million based on the old rate.
The revised 70 per cent rate would mean a DC of $1.68 million, which is up 40 per cent from $1.2 million.
The change takes place from Wednesday.
Property analysts say the move will take some heat off the en bloc frenzy, which has pushed up prices of such collective sales in recent months as sellers will now get less.
Developers' land acquisition costs could rise and this could eat into the profit that homeowners can reap from the collective sale of their homes,
In the stock market, investors also used the government's move raising the property development charges as an excuse to sell across the board, given the currently rich valuations of Singapore equities.
Property heavyweights City Developments fell $0.40 to $15.90, CapitaLand dropped $0.15 to $7.55 and Keppel Land lost $0.15 to $8.55.
A statement from the National Development Ministry (MND) on Wednesday said the DC rates have been revised to reflect the appreciation in land value, and is a reinstatement of what it was in 1985.
For land with title restrictions on the use and intensity, which are subject to a levy of Differential Premium by the Singapore Land Authority, it will similarly be adjusted to the 70% rate.
The land value of a site can be enhanced due to the government's action in rezoning the site to a higher value use or increasing the plot ratio.
The DC system, where a part of the enhancement in land value is taxed, allows the state to have a share of the gains from the value enhancement arising from its grant of planning approval.
The portion of the gain taxed by the government can then be used to offset expenditure on infrastructure movements, such as road and rail works, as well as utilities, to support the higher land zoning or intensification of land.
