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Thread: Development charges go up today

  1. #1
    Join Date
    Oct 2011

    Default Development charges go up today

    Development charges go up today

    Commercial, industrial properties hit but residential segment little affected

    Published on Sep 01, 2012

    By Esther Teo, Property reporter

    HIGHER property prices have prompted the Government to raise development charges (DC) for the commercial and industrial sectors, although the residential segment was largely untouched.

    These charges are applied when the value of a site is lifted as a result of rezoning or when a taller building is permitted following a change in the plot ratio.

    Taking effect today, they were released yesterday by the National Development Ministry. They are reviewed every six months.

    The new charges reflect recent land and property values for the various market segments.

    Charges have been hiked by 9per cent on average for commercial land and 14 per cent for industrial and warehousing use.

    However, the residential landed sector did not see rates rise, while rates in the non-landed segment inched up by an average of just 1 per cent - largely owing to higher values in the suburban and city fringe areas. The average fee for hotels rose 11 per cent.

    Experts say the rise in the commercial segment comes on the back of recent commercial en bloc sales and an active commercial strata-unit market. The biggest rise came in the areas of Lavender, Kitchener Road, Haig Road and Marine Parade, where rates have been lifted 20 per cent.

    This could be due to the ongoing urban regeneration in the Lavender and Kitchener Road areas, said South-east Asia research head Chua Yang Liang at Jones Lang LaSalle.

    "This neighbourhood has much hidden value, given its proximity to the city centre and improved accessibility," he said. "The chief valuer has revised the DC... in this area accordingly, reflecting the higher land values driven by ongoing regenerative effort in the neighbourhood despite the lack of reported deals."

    Colliers International director of research and advisory Chia Siew Chuin said sales of strata retail units at Centropod @ Changi and Millage were likely to have contributed to the rise as well.

    On the industrial front, however, the rise was supported by the brisk sales and unrelenting price increases of strata-titled industrial units, experts say. Continued demand for industrial land by developers and industrialists also fuelled this gain, said Ms Chia.

    Generally, the most telling increases were in the mature locations in the central, east and north-east regions, she added.

    For instance, gains of 19 to 23 per cent were seen in Bedok and Tampines and the Ang Mo Kio and Yio Chu Kang Road areas, on the back of keen competition and bullish tender bids.

    On the recent Thomson Line announcement, Dr Chua said that depending on how much land values trend over the next six months, the DC along this corridor could change. "The rates could be revised again to reflect the market expectation when these stations are eventually operational, as we have seen previously in the commercial rate after the opening of the integrated resort on Sentosa."

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  2. #2
    Join Date
    Oct 2011

    Default Commercial DC rates see a surprise hike

    Published September 01, 2012

    Commercial DC rates see a surprise hike

    They are jacked up by an average of 9% while industrial sector sees an expected 14.3% climb; homes largely untouched

    By Kalpana Rashiwala

    Changes in average DC rates

    Latest change

    THE development charge (DC) rates for commercial use were raised steeply, taking many market watchers by surprise. DC rates for industrial use also went up sharply, but the market had been bracing itself for this.

    Effective today, average DC rates for commercial use will go up 9 per cent, while those for industrial use will rise 14.3 per cent. The buoyant hotel industry will also see DC rates climb an average of 10.8 per cent.

    In contrast, the average DC rates for non-landed residential use rose only mildly. They were left untouched for landed residential use.

    DC is payable to the state in exchange for the right to enhance the use of certain sites or to build bigger projects on them. They are revised every six months taking into account current market values.

    While most analysts polled by BT earlier had predicted increases in DC rates for industrial use, they had expected rates to be either flat or to increase only slightly for commercial use.

    Yesterday evening, Jones Lang LaSalle's (JLL) head of SE Asia research Chua Yang Liang attributed the significant hike in commercial DC rates to recent commercial investment sales deals and a relatively active commercial strata unit sales market.

    DC rates are specified according to use groups across 118 geographical sectors throughout Singapore and revised on March 1 and Sept 1.

    For commercial use, the biggest hikes in DC rates of 20 per cent each were for Sector 93 (which includes the East Coast/Marine Parade locations) and Sector 53, which covers the Lavender/Kitchener/Farrer Park areas. For Sector 93, the increase was due to the sale of GRTH Building at East Coast Road in March at 179 per cent above the land value implied by the previous March 1, 2012, DC rate, according to JLL's analysis yesterday evening.

    The hike for Sector 53 is thought to be due to "normalisation" or equalisation of DC rates with surrounding areas, though JLL's Dr Chua suggests the ongoing urban regeneration in the location could have been a factor.

    Another reason for the 20 per cent rise in commercial DC rate for Sector 53 could be the bullish bid at a state tender in April for a hotel site above Farrer Park MRT Station - in the same sector. The top bidder was reported to be planning to build a significant retail component in addition to a hotel on the site. Indeed, Sector 53 topped the hikes for hotel DC rates, with a 26 per cent increase.

    As for commercial use, the DC rate for Sector 51, which includes Beach Road, was upped 17 per cent.

    The nudge could have come from the unit land price for the sale of KeyPoint by Frasers Commercial Trust to Fragrance Group and World Class Land in April. Another acquisition by Fragrance, Tower 15 at Hoe Chiang Road, in May, also is understood to have been the impetus for a 16 per cent hike in the commercial DC rate for geographical Sector 10 (which includes Anson/Cantonment roads).

    Tower 15's transacted price works out to $1,420 per square foot (psf) of potential gross floor area (GFA), or about $15,285 per square metre of GFA, which would be about 91 per cent above the land value implied by the March 2012 DC rate for commercial use for the sector.

    Sector 109 - which covers King Albert, Dunearn and Ulu Pandan locations - also saw a 16 per cent commercial use DC rate hike. The spur was probably the sale of McDonald's Place at King Albert Park at $12,992 per square metre of potential GFA - 160 per cent above the March 2012 DC-rate implied land value. Two nearby sectors - 68 and 69 - also saw their DC rates being jacked up by 16 per cent.

    In all, commercial DC rates were increased in 114 geographical sectors, with the smallest hikes at 5 per cent (including the Raffles Place, Marina Centre and Marina Bay areas). There were no changes for the remaining four sectors - including those in the Orchard and Somerset MRT stations' locations, Jurong and Pulau Ubin/Pulau Tekong, based on JLL's analysis.

    Industrial DC rates were raised in 116 sectors (by 12 to 23 per cent) and were left untouched in the other two. The sector covering Ang Mo Kio/Yio Chu Kang topped the increases.

    An industrial plot was sold at Serangoon North Avenue 4 at 86 per cent above the then DC-rate implied land value. Colliers International director Chia Siew Chuin noted that winning bids at state tenders for this site as well as three other plots in Aljunied/Sims Drive, Kaki Bukit and Tai Seng Link exceeded land values implied by March 2012 DC rates by 55-94 per cent.

    As for homes, non-landed residential DC rates went up by an average of 1.2 per cent. They were raised in only 15 sectors with no change in the other 103.

    The largest increase of 12 per cent was in Sector 98. Two 99-year private housing sites at Tanah Merah Kechil Road and Tampines Avenue 10 were sold at state tenders in the past six months at around 80 per cent and 12 per cent above their then DC-rate implied land value, shows Colliers' analysis.

    Sector 72 - which includes the Prince Charles Crescent/Alexandra Rd vicinity - saw an 11 per cent growth, probably due to the $7,807 per square metre of GFA price at which a reserve list in the area was recently triggered for release.

    Two collective sales in Pasir Panjang, Westvale Condominium and Harbour View Gardens, at prices above the value implied by existing rates, likely provided the impetus for an 11 per cent increase in the DC rate for Sector 111.

    Sector 100 was up by the same quantum; the area saw two sites (at Sengkang Square and Buangkok Drive) sold at 64 per cent and 58 per cent above the land value implied by March 2012 rates.

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