Govt revises development charge rates selectively by between 2 & 4%

http://www.channelnewsasia.com/stori...001917/1/.html

Govt revises development charge rates selectively by between 2 & 4%

By Wong Siew Ying, Channel NewsAsia | Posted: 31 August 2009 1916 hrs


SINGAPORE: The Singapore government will revise the development charge (DC) rates for some segments of the property sector to better reflect the current market values.

A development charge is a tax levied when a property site is developed into more valuable project allowing the government to have a share of the gains from the enhanced value.

In a statement, the Ministry of National Development (MND) said it will cut the development charge rate for non-landed residential properties by two per cent on average.

The change will take effect from September 1 and will last for six months.

Analysts said the reduction is conservative and is unlikely to affect the property market in a big way.

Property consultancy firm Colliers International noted that in revising the tax, the government has not been unduly influenced by the recent buying fever in the home sales market nor rising interest in development sites.

The highest tax cut for residential developments is seen in the Sentosa Cove enclaves at 17 per cent.

Property analyst Nicholas Mak said the average two percentage-point drop in DC rate for non-landed residential properties will not discourage developers from redeveloping or acquiring new development sites as the demand for homes is still expected to be healthy in the coming months.

Mr Mak also does not expect the revision to spur the enbloc sales market nor affect prices of new private homes.

However, Dr Chua Yang Liang from Jones Lang LaSalle said the lower DC rates in the central and prime districts could potentially drive some developers to re-visit enbloc projects which have been shelved previously.

This could happen ahead of a possible upward revision at the next DC review in March 2010 should the recent run-up in residential demand continue.

Other revisions announced on Monday include a four per cent rate cut for commercial, hotel and hospital developments.

A similar cut will also apply to sites being developed for commercial use in the business zone.

The downward revision in DC rates for commercial use properties is largely expected.

Real estate consultancy firm CB Richard Ellis said that's mainly due to weakness in the office sector and limited interest in developing commercial properties.

For the hotel segment, CBRE notes that most of the decline in DC rate applies to developments in Orchard Road, Sentosa and the Central Business District.

The decrease for these areas ranges from between nine and 11 per cent, comparable to the reductions in the previous revision.

MND said there will be no changes to the land use groups and sector boundaries in this latest review. - CNA/vm

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Published September 1, 2009

Another round of trimming for development charge rates

Sharp cuts for commercial DC rates at Raffles Place; no change for landed residential, industrial uses

By EMILYN YAP


(SINGAPORE) The government has again trimmed development charge (DC) rates for some sites - though the cuts on average are smaller than those made six months ago.

The changes were largely in line with market expectations. Some industry watchers felt that the continued cuts reflect the government's caution in dealing with the property market when the economy remains shaky.

Developers have to pay DC for enhancing the use of some sites, and the market monitors these rates closely as they reflect land values. As part of a half-yearly review, the National Development Ministry (MND) announced yesterday a 2 per cent drop in the average DC rate for non-landed residential use. This is far below the 15 per cent chop in February.

MND also reduced the average DC rate for hotel and hospital use by 4 per cent. This is again smaller than the previous 10 per cent cut.

The average DC rates for commercial and business zone commercial uses each fell 4 per cent. For these use groups, the percentage change was the same as that six months ago.

MND left DC rates for landed residential and industrial uses unchanged - just as it did in February. Yesterday's revision will apply from today onwards to February 28 next year.

The DC rate changes were 'generally within expectations' and show the government's 'cautious stance with regard to the outlook for the property market, in view of the still uncertain economic outlook,' said Colliers International research and advisory director Tay Huey Ying.

She cited cuts to non-landed residential DC rates as an example. Although developers have chalked up record sales for private homes and are putting in bids for sites once again, the government still took a 'conservative approach' and shaved DC rates for many areas.

According to Jones Lang LaSalle's (JLL) analysis, non-landed residential DC rates fell across 22 geographical sectors by 2.7 to 16.7 per cent. Sentosa's DC rate saw the largest clip, while the Newton area's slid 15.8 per cent. The River Valley area also experienced a 14.1 per cent decrease in DC rates.

Commercial DC rates fell by 4.3 to 13 per cent across 68 sectors. The sharpest declines were in the Raffles Place, Philip St, Marina Centre and Fullerton areas.

'The decline in the DC rate for this use group was largely expected, as fundamentals for this property type are still weak and the overall interest in developing commercial properties is limited,' said CBRE Research executive director Li Hiaw Ho.

JLL's head of investment Stella Hoh also reckoned that the Chief Valuer 'is likely to be adjusting the DC rates cautiously in view of mixed market sentiments and economic outlook'. The commercial property sector has had a few rough quarters - prime office rents have plunged almost 50 per cent from their peak last year.

Hotel DC rates dropped by between 2.4 and 11.1 per cent across 53 sectors. The steepest falls were seen in the Selegie, Princep St, Waterloo St and Mount Emily areas. DC rates in the Orchard and Sentosa areas also weakened.

'Tourist arrivals are still on the decline and have yet to recover,' Mr Li noted. According to him, the average islandwide occupancy rate for hotels has suffered, falling from 82.8 per cent in H1 2008 to 71.9 per cent in H1 2009.

DC rates for non-landed residential uses were closely watched when the collective sales market was at its peak. This time round, the rates may not have much impact on the market as most deals are only in the early stages of preparation, said Credo Real Estate managing director Karamjit Singh. The next round of DC rate revision would probably be 'more consequential', he added.

http://www.businesstimes.com.sg/mnt/...AGES_eydc1.jpg

http://www.straitstimes.com/Prime%2B...ry_423775.html

Sep 1, 2009 Tuesday

Development charges come down

Modest cuts reflect cautious stance by Government, say consultants

By Joyce Teo


THE Government has made some moderate cuts to the development charges which property developers pay for enhancing the use of non-landed residential sites, such as condominium sites.

This reflects the Government's cautious outlook on the property market, some property consultants say, though one consultant queried any cut in the current red-hot residential market.

The rates for development charges fell by an average of 2 per cent, compared with a 15 per cent cut six months ago. These charges can vary from a few million dollars to tens of millions depending on the size of the project involved.

Some areas were unchanged while others were subject to bigger falls. The rate for Sentosa, for instance, got the biggest cut - 16.67 per cent - while there was a 10 per cent fall for the Balestier area.

There was no change in the latest regular six-monthly review in relation to landed private home sites and industrial sites.

Property consultants mostly said the cuts were within expectations.

This 'reflects the Government's cautious stance with regard to the outlook for the property market, in view of the still uncertain economic outlook', said Colliers International's director for research and advisory, Ms Tay Huey Ying.

'This is especially prominent for the non-landed residential and industrial use group,' she said.

DTZ's head of SEA Research, Ms Chua Chor Hoon, was surprised that the charges were lowered for non-landed residential property given the rally in property prices from the secondquarter.

'The Government is probably being cautious as there were hardly any land deals in the past six months,' she added.

In a statement, CBRE Research said it believed the Government did not 'tamper too much' with the charges as developers started looking for development sites seriously only in July.

'It is heartening to note that the Government had not been unduly influenced by the recent buying fever seen in the home sales market nor the rapidly rising interest seen for development sites,' said Ms Tay.

There has been overwhelming interest in Singapore's private homes market in recent months. Developers have of late shown strong interest in buying land.

Developers will still be keen on redeveloping or acquiring new development sites as the demand for residential properties is still expected to be healthy in the coming months, said Ngee Ann Polytechnic real estate lecturer Nicholas Mak.

But the overall 2 per cent drop in non-landed residential development charge rates is too small to spur collective sales, he said.

The Government also cut the rates for commercial sites and sites for hotel and hospital use by 4 per cent.

The largest falls for commercial sites of 13 per cent were in such core central business district areas as Raffles Place, Marina Bay and Shenton Way.

The cut in rates for commercial sites was expected, given the weak office market with rents continuing to tumble.

Also, the hotel sector is still suffering from falling visitor arrivals and low occupancy.

The National Development Ministry sets the rates - which reflects land values - every March and September, taking into account market values, in consultation with the Chief Valuer.

The new rates apply from today.

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