Rates tweaked slightly in dull market

http://www.businesstimes.com.sg/sub/...94599,00.html?

Published August 30, 2008

DEVELOPMENT CHARGE

Rates tweaked slightly in dull market

Bigger cuts in store if stronger evidence of falling property values emerges

By KALPANA RASHIWALA


(SINGAPORE) Despite weaker property sentiment, the government has opted to leave development charge (DC) rates largely unchanged, except for an average 6.3 per cent cut for non-landed residential use.

There may not be sufficient evidence of declines in property values yet, market watchers said, but the rates could be cut at the next revision if stronger evidence emerges to show values are falling.

DC rates, which may be payable for enhancing the use of some sites, are revised twice yearly, on March 1 and Sept 1, by the Ministry of National Development in consultation with the Chief Valuer.

DC rates are stated across 118 geographical sectors. MND announced changes to boundaries affecting eight geographical sectors in three vicinities - the Race Course Road area (following the realignment of Race Course Road after the completion of Farrer Park MRT Station), Jurong Lakeside area (where there are plans under draft Master Plan 2008) and Pulau Brani (which has been moved out of the geographical sector that includes Sentosa).

Jones Lang LaSalle's analysis shows that a site redesignated from one sector to another in the Jurong Lakeside area could see increases in DC rates of 35 per cent for landed residential use, 39 per cent for hotel use and 38 per cent for industrial use based on Sept 1, 2008 rates.

As for the minimal changes in DC rates for most use groups, CB Richard Ellis executive director Li Hiaw Ho said this was in line with the slow pace of public and private land transactions seen this year.

Knight Frank managing director Tan Tiong Cheng said: 'For the commercial (office, retail) sector, we do not have direct evidence to show land values have dropped. For residential, the collective sales market has quietened but there has been evidence at recent state land tenders to show a decline in land values.'

That could account for the chops in DC rates for non-landed residential use.

Jones Lang LaSalle head of research (Southeast Asia) Chua Yang Liang too pointed to several cases of 99-year condo sites being sold at state land tenders recently at prices below their March 1, 2008 DC rate-implied land values.

DC rates for non-landed residential use were trimmed in 116 of the 118 locations. The cuts ranged from 3.8 per cent (in the Pasir Ris/Loyang and Punggol areas) to 10.8 per cent in the Balestier area. Recent transacted prices for non-landed projects like The Marque, Vutton and Pavilion 11 might have been the reason for the DC cut. The rate for Sentosa was trimmed 10.5 per cent, perhaps based on prices achieved recently at condos like Marina Collection and Turquoise at Sentosa Cove.

Two adjacent geographical sectors covering Ang Mo Kio/Bishan and Braddell/Potong Pasir, saw respective cuts of 10 per cent and 9.4 per cent. The cuts could be due to a 99-year condo site at Lorong 2/3 Toa Payoh near Braddell MRT Station being sold in April at 23 per cent below the price paid for a condo site next to Ang Mo Kio Hub in September last year.

DC rates for landed residential, commercial and hotel uses were completely untouched across the 118 geographical sectors. For industrial use, the rate was increased 11.1 per cent in the Paya Lebar/Eunos area but unchanged in the other 117 locations.

CBRE's Mr Li said the latest DC rate revisions were 'pretty much an academic exercise as there aren't many en bloc sales or redevelopments of sites going on which would involve DC payments'.

'Nobody is getting excited; there's little practical effect.'


http://www.businesstimes.com.sg/mnt/..._DEVCHARGE.jpg

http://www.straitstimes.com/Money/St...ry_273285.html

August 30, 2008 Saturday

Dip in property development fees

Lower charges for non- landed private homes - first time in 5 years - reflect fall in land values

By Fiona Chan, Property Reporter

http://www.straitstimes.com/STI/STIM...FIOCHARGES.jpg
Aside from prime locations, city fringe areas similar to this one off Newton Road are always development rates have dropped the most. -- ST FILE PHOTO

http://www.straitstimes.com/STI/STIM...80830/down.jpg

ANOTHER sign that the values of land and private homes are sliding arrived yesterday in the form of the new property development charges.

These charges, which reflect changes in land and property values over the last six months, were lowered for residential apartments and condominium units for the first time in five years.

Property consultants were not surprised. They had expected fees in this sector to stay stable or dip slightly, given that the only residential plots sold in the past six months were state-owned parcels that transacted at fairly low prices.

No area was spared, with rates for non-landed residential homes falling across the board by an average of 6 per cent islandwide.

The move was the 'first signal from official sources that some values in the property market are falling', said Mr Nicholas Mak, director of research and consultancy at Knight Frank.

The Government levies development charges on developers who want to build a new, bigger development on an existing site they have bought.

The fees are categorised by sector and location. They are revised every six months by the chief valuer, based on transactions of land and property in the past half-year.

Lower charges imply that recent land and property deals have been transacted at lower prices, and also mean that it will be cheaper for developers to buy and redevelop a collective-sale site, for instance.

But property consultants do not expect the new lower charges to revive the deathly quiet collective-sale market.

'The rise in construction costs is higher than the fall in development charges. So total development cost would still increase,' said Mr Mak.

Developers may also hold out for further decreases in development charges in the next revision in March, he added.

'All we need is another quarter of weak sentiment and chances are, six months from now, there could be more downward revision in the charges.'

Mr Li Hiaw Ho, executive director of CB Richard Ellis (CBRE) Research, also expects development charges to fall again in upcoming revisions.

'In the next 12 to 18 months, development charges might move downwards moderately to reflect a scenario of realistic consolidation after the run-up in land prices in the past two years,' he said.

This time around, the falls in fees for non-landed residential land ranged from 3.85 per cent to 10.77 per cent, depending on location.

Areas where rates dropped most included prime locations such as Ardmore Park and Sentosa, city fringe districts like Balestier, Keng Lee and Kallang, and suburban regions such as Bayshore and Bishan.

Apart from non-landed residential land, development charges barely budged in other sectors, reflecting the lack of activity and flat prices in the broader property market.

The fees for land to be used for offices, shops, landed homes, hospitals or hotels remained unchanged across all locations in Singapore.

For industrial land, charges rose only in the Ubi and Kaki Bukit area. They went up 11.1 per cent, possibly due to the recent sale of an industrial site in Ubi Avenue 4/Ubi Road 2 in April, suggested CBRE's Mr Li.

[email protected]