Development charges for condo sites cut again

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Development charges for condo sites cut again

Largest drop for Tampines Road, Hougang, Punggol and Sengkang area

Published on Feb 28, 2015 1:24 AM

By Rennie Whang


IN A tough market, some modestly good news emerged for developers yesterday as development charges (DCs) for condo and other non-landed sites fell again.

Developers pay DCs to the Government for enhancing the use of a site or building a bigger project.

The Ministry of National Development said it has cut DC rates for non-landed residential use by an average of 3.2 per cent, the second straight cut - in line with property price moderation.

The new rates, which take effect tomorrow, were released yesterday. DCs are reviewed every six months and revised based on current market values.

They were trimmed for non-landed residential use by 1.6 per cent six months ago. Before that, they were cut in March 2012.

This time, 73 of 118 sectors registered falls in DC rates for non-landed residential use. The other 45 sectors stayed flat.

The largest drop of 12.5 per cent was for sector 100 - the Tampines Road, Hougang, Punggol and Sengkang area. Sim Lian Land's top bid for the Anchorvale Crescent executive condominium (EC) site earlier this month - $157.8 million, or about $280 per sq ft per plot ratio (psf ppr) - could have sped the decline, as it was the lowest tabled for an EC site since July 2011, said Ms Chia Siew Chuin, Colliers International director of research and advisory.

Hao Yuan Investment's successful bid later in the month for a Woodlands Avenue 12 EC site - which at $103.8 million, or about $278 psf ppr, was even lower - could also have led the DC rate for non-landed residential use in Woodlands to be cut by 5.1 per cent.

Apart from these two areas, DC rate declines were generally located in the central region, on the back of the weak home-buying sentiment and demand for high-end homes, said Ms Chia.

DC rates for sectors 37 and 38 in the prime residential districts of 9, 10 and 11 - covering Clemenceau Avenue, Scotts Road, Winstedt Road, Bukit Timah Road, Sarkies Road and Balmoral Road - fell 7.1 per cent while that for Orchard Road fell 5.9 per cent.

DC rates were unchanged for landed residential use, hotels and hospitals, industrial use, and places of worship and civic and community institutions.

But they were raised by an average of 2 per cent for commercial use, the third straight increase after going up by an average of 2.1 per cent half a year back. Ms Christine Li, Cushman & Wakefield director of research, said this was supported by the robust commercial investment market.

Among the sectors seeing the largest increase of 9.1 per cent were 8 and 10, including Maxwell Road, Telok Ayer Street, Hoe Chiang Road and Keppel Road.

This may have been caused by sales of strata units on the 18th, 19th and 21st floors of Samsung Hub at $3,175 psf to $3,280 psf in the fourth quarter of last year, exceeding the $3,030 psf paid for the 14th floor in April, said Ms Li.

Half of the 11th floor at Prudential Tower was transacted at $2,750 psf, a rise from the $2,316 psf achieved in the building's collective sale in the second quarter.

Dr Chua Yang Liang, JLL head of research for South-east Asia, said most of the large rises were in sectors with some shophouses.

"This type of real estate has caught the attention of investors and prices have been on an upward trend of late. This is possibly one factor that has motivated the significant increase in commercial rates in these sectors."

The divergent trend between the residential and commercial markets is likely to continue, but should diminish as the large office supply comes in, he added.

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DC rates for non-landed residential use trimmed 3 per cent

But development charge rates for commercial use have been raised 1.9%

By Kalpana Rashiwala

[email protected]@KalpanaBT

28 Feb


THE government is reducing development charge (DC) rates - payable for enhancing the use of some sites or to build bigger projects on them - by 3.2 per cent on average for non-landed residential use for the period March 1 to Aug 31 this year. This is the second consecutive drop and double the 1.6 per cent decline in the previous half-yearly revision, which took effect on Sept 1 last year, shows JLL's analysis. The latest cut comes amid continued weakness in condo and apartment prices, note market watchers.

However, DC rates for commercial use have been raised by 1.9 per cent on average, matching the increase in the previous revision. The latest increase is the third consecutive rise and was probably supported by buoyant prices for office space in addition to CBD shophouses. JLL's head of research for South-east Asia Chua Yang Liang said: "Interestingly, most of the large increases occur in sectors with a presence of shophouses. This type of real estate has caught the attention of investors and prices have been on an upward trend of late. This is possibly one factor that has motivated the significant increase in commercial rates in these sectors."

DC rates for all other use groups were left completely unchanged.

The Ministry of National Development, in consultation with the chief valuer, revises DC rates twice a year - on March 1 and Sept 1. The rates are stated according to use groups across 118 geographical sectors in Singapore. DC rates for the major use groups are expressed as per square metre of gross floor area.

For non-landed residential use, nearly 62 per cent, or 73 of the 118 geographical sectors across Singapore saw declines in DC rates ranging from 2 per cent to 13 per cent.

These sectors are mostly found in the Core Central Region (CCR), where high-end homes are located, and in the Punggol/Sengkang and Yishun/Woodlands areas, observed Colliers International director Chia Siew Chuin. Recently, a site each in Anchorvale Crescent in the Sengkang area, and along Woodlands Avenue 12 fetched the lowest prices for executive condominium housing land since July 2011. The lower DC rates in CCR was not surprising given that the high-end condo prices have come under pressure.

The biggest drop of 13 per cent was in sector 100 only, which covers Tampines Road, Hougang, Punggol and the Sengkang area. This was seen as triggered by the winning bid for the Anchorvale Crescent EC site at S$280 per square foot per plot ratio, or 35 per cent lower than the land value implied by the then prevailing Sept 1, 2014 DC rate for the sector. The DC rate drop in sector 100 also brought down DC rates for the neighbouring sectors 106 and 105.

Sector 38 saw a 7 per cent DC rate drop, which was attributed to the pricing for the bulk sale of 48 units at Treasure on Balmoral last December by developer Hiap Hoe to its parent company at a discount. This probably also brought down the DC rate for the neighbouring Sector 37 by 7 per cent.

For commercial use, DC rates were raised for only 26 per cent or 31 of the 118 geographical sectors; the increases ranged from 4 to 9 per cent. There were no changes in the other 87 sectors.

The sectors that saw the biggest gain of 9 per cent included sectors 8 and 10 (Maxwell Road, Telok Ayer Street, Hoe Chiang Road and Keppel Road) and sectors 13 and 14 (Marina Gardens Drive, Marina Mall, Sheares Avenue and Marina Link). Sector 16, which includes the Chinatown area, Amoy Street and Peck Seah Street area, also saw a 9 per cent rate hike, and this was attributed to the pricing for the sale of a row of six shophouses along Peck Seah Street.

A 9 per cent DC rate hike for commercial use was also posted for sectors 15, 17 and 18 (which include Eu Tong Sen Street, Upper Pickering Street, Upper Cross Street, Outram Park and Chin Swee Road).

The same increase was seen in sectors 19, 20 and 21 (which include the Kim Seng Road, Robertson Quay, Havelock Road, the Clarke Quay and Boat Quay areas and North Canal Road), as well as sectors 61 and 62 (Bukit Timah, Dunearn, Newton, Keng Lee roads and the Thomson Road area).

Sector 1, which includes the Raffles Place/Golden Shoe area, saw an 8 per cent hike in commercial use DC rate. Cushman & Wakefield director of research Christine Li said that this could be due partly to the sales of strata units in Samsung Hub. In addition, half of the 11th floor at Prudential Tower was transacted at S$2,750 psf in October 2014 by the new owners, who had paid S$2,316 psf for the 19.5 floors that they had bought in the building in Q2 2014. Colliers' Ms Chia also highlighted the sale of Straits Trading Building in Raffles Place for S$2,832 psf of net lettable area in September - which was the highest fetched for an entire office block in six years.

Ms Li said that increases in DC rates for the Marina area were supported by the one-third stake sale of Marina Bay Financial Centre Tower 3 by Keppel Land to Keppel Reit at S$2,680 psf last September.

DC rates for industrial use were left untouched for the third consecutive review period, reflecting the mixed performance in this segment, said Ms Chia. "In the past six months, while the four industrial Government Land Sale sites located in Tuas with leasehold tenures of 20 to 22 years - which are suited for low-intensity single-user developments - were sold at prices some 26 per cent to 60.4 per cent above the DC-imputed land values, the two 30-year leasehold sites that are suited for multi-user developments, namely Plot 12, off Tuas South Avenue 7 and Plot 1, Tampines North Drive 1, were sold at prices that were 22.7 per cent and 31.9 per cent below the imputed land values, respectively," she added.

There were also no DC rate changes for the hotel/hospital and place of worship/civic and community institution use groups this time, contrasting with increases of about 9 per cent for each in the Sept 1, 2014 revision.

DC rates for landed residential remained unchanged for the second consecutive time.