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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