Source : The Strait Times, 21 August 07
THE recent record-breaking run of collective sales is likely to push up a key government charge imposed on developers, making land sites - and collective deals - more expensive.
This development charge, which is due for a half-yearly revision on Sept 1, could rise by up to 25 per cent islandwide for residential non-landed sites on average, say property consultants.
This is almost double the 14 per cent rise in the previous revision in March, which was already considered a large increase. Even so, most consultants believe higher charges may not dampen the collective sale market as long as developers remain bullish.
Development charges reflect recent land and property values and affect future acquisition decisions by developers. They can reach millions of dollars, and vary according to land use for the 118 locations in Singapore.
The upcoming revision is likely to be watched closely by developers, as it comes on top of a surprise 40 per cent hike in development charges last month.
Given the frenzied pace of collective sales and the soaring prices of offices, most consultants expect the charges to jump the most for residential and commercial sites.
According to property firm Jones Lang LaSalle (JLL), collective sales added up to $10.2 billion in the first seven months of this year alone, boosted by benchmark deals such as The Ardmore in Ardmore Park and Fairways Condominium in Telok Blangah.
JLL expects development charges for non-landed sites to rise by up to 60 per cent in certain areas, led by District 9, East Coast and Telok Blangah.
But another firm, Colliers International, believes city-fringe sites will see higher increases.
While charges for non-landed sites jumped the most in prime areas during the last revision, Colliers expects that this time round, they will rise more in areas 'located at the immediate fringe of Orchard, downtown and Sentosa Cove'. These include the Novena, Newton, Holland Road, Farrer Road and Telok Blangah areas.
But large increases are also likely in areas as far afield as St Patrick's Road near Katong and the area around Upper Paya Lebar and Geylang, due to recent transactions in those areas, added Colliers' director of research and consultancy, Ms Tay Huey Ying.
As for landed sites, JLL is predicting a 20 to 30 per cent rise in development charges islandwide, with those for District 11 sites jumping by up to 50 per cent.
Office sites are also expected to see higher charges.
Colliers' forecast is a 40 to 50 per cent jump for Collyer Quay and Marina Bay, and 25 to 40 per cent for the Central Business District. JLL expects increases of 20 to 25 per cent islandwide.
Despite the fact that the hikes in development charges are likely to be higher and more widespread this time, consultants believe they may not slow the collective sale market or halt rising land prices.
Ms Tay noted that in the last revision, the charges had been raised by up to 64 per cent for some locations, but that did not deter the collective sale fever from going strong.
'For well-located sites, developers' bullishness in the end-user market gives them the confidence to bid for land at benchmark prices,' she said. 'They are confident of passing on the increased costs to end-purchasers through benchmark launch prices.'
But she added that for sites in less desirable locations, a steep hike in development charges could 'serve as a wake-up call to home owners who have been holding out for a higher premium'.
Agreeing, JLL's regional director and head of investments, Mr Lui Seng Fatt, said that development charges for freehold land are small as a proportion of the total land price and development cost.
'However, it will have a more significant impact for leasehold land because more charges are usually payable,' he said.
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