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Thread: DC rate revision leaves many a market player agog

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    Default DC rate revision leaves many a market player agog

    http://www.businesstimes.com.sg/arch...-agog-20130831

    Published August 31, 2013

    DC rate revision leaves many a market player agog

    Expected hike for commercial use falls flat while industrial use jumps a stunning 15.4%

    By Kalpana Rashiwala [email protected]


    IN a move that surprised some market watchers, the government has raised development charge (DC) rates for industrial use by around 15 per cent on average, while leaving the rates for commercial use completely untouched.

    It has also upped DC rates for landed residential use by an average of 7 per cent and those for non-landed residential use by 5 per cent on average. DC rates for hotel use were left unchanged.

    The new rates apply for the period Sept 1, 2013 to Feb 28, 2014.

    DC rates are payable for enhancing the use of some sites or building bigger projects on them. The rates, revised on March 1 and Sept 1 each year, are stated according to use groups across 118 geographical sectors. The Ministry of National Development, in consultation with the Chief Valuer, revises DC rates based on current market values.

    Chua Yang Liang, SE Asia research head of Jones Lang LaSalle, said that he was surprised by the magnitude of the increase for industrial and landed uses. He also notes that in the previous revision six months ago, the rates for commercial and hotel use posted sharp increases averaging more than 20 per cent, while residential and industrial rates saw either small increases or were left untouched.

    "This round, it seems to be the reverse. This suggests Chief Valuer could be taking the opportunity to narrow the gap in land values between different property segments and at times even between different locations within the same use group."

    He points to a "rare trend" in the latest DC rates where the percentage rate of increase for landed residential use is the same across many geographical sectors despite their different DC rates. For instance, a 13 per cent rate hike was seen in central and east locations represented by key areas of Tanglin, Jervois, River Valley, Tanjong Katong and Telok Kurau despite their DC rates ranging from $3,710 to $6,300 per square metre of gross floor area\.

    Colliers International director Chia Siew Chuin, like Dr Chua, was also surprised by the fact that the rates for commercial use were left untouched for all 118 geographical sectors despite evidence of various land deals in the past half year pointing to DC rates trailing land prices. Examples include a state land sale along Venture Avenue in the Jurong Gateway area for $1,009 per square foot per plot ratio in March, 25.7 per cent above the land value implied by the DC rate for the location. Bright Chambers in Middle Road was sold at 70.3 per cent more than the land value implied from the March 1 commercial use DC rate for the sector.

    Ms Chia found the 15.4 per cent average hike for industrial use DC rates a tad above her expectations given moderation in the rate of increase of the Urban Redevelopment Authority's price index for industrial property in the first half of this year.

    Industrial DC rates have been raised in all geographical sectors by 7-29 per cent. The biggest hike is in sectors 115 (Woodlands, Senoko, Sembawang, Yishun area), 107 (including Upper Thomson Road and Sin Ming Industrial Estate), 73-75 (including Kim Tian Road, Tiong Bahru Road, Delta Road and Jalan Bukit Merah) and 77-88 (which includes Telok Blangah Road and Alexandra Road).

    A state land sale of an industrial plot in Woodlands Industrial Park E9 in July at $161 psf ppr was 141 per cent above the March 1 DC rate-implied land value for the area. Rate hikes in some of the above sectors were also supported by sales of strata industrial units in developments such as Apex@Henderson and E-Centre@Redhill.

    For non-landed residential use, the increases in DC rates range from 5 per cent to 28 per cent in 53 out of 118 sectors. Sector 74, which includes the Kim Tian/Tiong Bahru location, saw the biggest rate jump of 28 per cent. A condo plot on Kim Tian Road was sold in April for $1,163 psf ppr, 117 per cent more than the March 1 DC rate-implied land value. Sector 60 (which includes the Moulmein/Thomson location) saw an 18 per cent hike. Ultra Mansion in the vicinity was sold for $1,170 psf ppr, 35 per cent higher than the March 1 DC-rate implied land value.

    Karamjit Singh, JLL's head of investment sales, said that in general, the impact of the DC rate revisions on en bloc sales is marginal. Based on the cases that JLL is managing, no DC is payable for about 16 per cent while another two-thirds have their DC rates maintained.

    Agreeing, Colliers noted that the level of activity in the collective sales market was subdued anyway.

    MND raised landed residential DC rates by 5-13 per cent in 76 sectors. The biggest jump of 13 per cent applies to 13 geographical sectors, including those covering the Tanjong Katong Road, Changi Road, Joo Chiat and Telok Kurau areas, Siglap, Bedok South, as well as parts of prime districts 9 and 10 such as Devonshire, River Valley, Tanglin and Jervois areas.

    Also, geographical sectors that include locations where some high profile Good Class Bungalow deals have taken place such as Cornwall Gardens, Holland Park, Coronation Road West and Second Avenue saw DC rates climb 8 per cent.

    Colliers' Ms Chia said that despite there being no sale of hotel land in the past half year, the market had generally expected a moderate increase in DC rates for hotel use of up to 3 per cent. This is because of the current interest in acquiring hotel as a real estate asset for investment. A few high-profile deals for existing hotels have taken place in recent months, most notably the Grand Park Orchard, which valued its hotel rooms at a record $1.4-1.5 million each.

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    $$$$$$
    In the final analysis.....its NOT whether you have a diploma,degree,masters OR PHD....its whether you have a HDB/PC/EC or LANDED...

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