SINGAPORE: Property developers and market-watchers alike are still trying to work out the impact of Wednesday's move by the government to raise land development charges.
CapitaLand says it is looking at an increase of just 1-3 percent in the total development costs for its new projects at Gillman Heights and Farrer Court, which it acquired through enbloc sales just recently. Meanwhile, some analysts say the en bloc fever may still persist, driven by bullishness among developers.
Wednesday's hike in the development charge rate to 70% from 50% came as a surprise to the markets, and was seen as a dampener on en bloc sales.
But there are analysts who point to history. They say there have been hikes of as much as 64% in development charges in some popular areas in the past, and these had little impact on demand.
Said Tay Huey Ying, Director of Research, Colliers International, "This has not caused the collective sales fever to slow down. And neither has it stopped land price from escalating.
"And I think the reason is because developers' bullishness in the end purchaser market is giving them the confidence to go ahead and bid aggressively for land, and they are confident that they can pass on this increase in cost to the end purchasers."
Property giant CapitaLand says it has already factored in estimates on such business costs, and expects total development costs for its recent en bloc purchases to go up by between 1 and 3 percent.
It had paid S$548 million to acquire Gillman Heights, and over S$1.3 billion for Farrer Court.
Some market-watchers say they expect the property market to stay buoyant and the positive sentiment to continue.
Said Tan Hong Boon, Executive Director, Credo Real Estate, "If the reading of the market into this measure is part of the cooling measure that is to come, then probably it may affect sentiments.
"However, from what we are accessing from the market we think that it's just a knee-jerk reaction right now, and the overall market economy is still very strong and the positive market sentiments will continue."
Analysts will be looking out for the next review of the land development charges, which is expected to take place in late August.
This is expected to lead to a significant increase in development charges for some areas.
Despite this, market watchers say overall en bloc deals can hit S$16 billion this year, double the S$8 billion record set in 2006.
Private home prices are expected to go up by as much as 25% this year. - CNA/yy
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