Consultants project smaller DC rate rise for residential and commercial use
THE coming March 1 revision of development charge (DC) rates - payable to enhance the use of sites or build bigger projects on them - is generally expected to be more moderate than the past couple of revisions, which imposed steep rises.
That's because on the whole, land price increases have slowed considerably in the the past few months. And collective sales, which traditionally account for the lion's share of private-sector land sales, have virtually ground to a halt, property consultants have told BT.
'We believe collective sale brokers are unlikely to feel inspired by the upcoming DC rate revisions,' says Jones Lang LaSalle's regional director and head of investments Lui Seng Fatt.
Most consultants project smaller average DC rate increases for residential and commercial use this time. However, JLL is predicting bigger hikes for industrial and hotel use, as hotel and industrial sites sold at government land sale (GLS) tenders in recent months have fetched top bids significantly higher than the land values implied by current DC rates.
This can be attributed to the shortage of hotel rooms and strong demand for industrial space by office tenants looking for cheaper backroom space, says JLL's head of research (South-east Asia) Chua Yang Liang.
For non-landed residential use, JLL reckons the average DC rate will go up just about 5 per cent come March 1, compared with the 58 per cent hike that took effect on Sept 1, 2007.
CB Richard Ellis executive director (investment sales) Jeremy Lake also reckons that on the whole, non-landed residential DC rates are unlikely to rise significantly, although there may be hikes in locations where land sales have taken place at prices significantly above values implied by the prevailing Sept 1, 2007 DC rates.
Market watchers point to examples such as Westwood Apartments in Orchard Boulevard, Toho Garden in Yio Chu Kang Road and 15 terrace houses at Jalan Bunga Raya in the Balestier/Novena area.
Agreeing, Credo Real Estate executive director Yong Choon Fah says the increases for such locations could be in the order of 30-40 per cent, while the average islandwide hike will be much smaller at 5-20 per cent.
DC rates - revised every six months, on March 1 and Sept 1 - are listed according to use (for example, non-landed residential, commercial, and industrial) and 118 locations across Singapore.
Savills Singapore director Steven Ming, who predicts a 0-10 per cent rise in the average non-landed residential DC rate, reckons both prime and suburban/mass-market areas will see only moderate increases.
However, bigger rises may be seen in mid-tier locations like Pasir Panjang, Balestier, Upper Bukit Timah, Hillview and Upper Thomson, where condo prices have risen 20-40 per cent in the past six months.
For landed residential use, JLL projects the average increase this time could be 8-15 per cent - again lower than the 11.3 per cent rise in Sept 2007.
Jones Lang LaSalle expects the rates for places like Dunsfold Drive and Binchang Rise in the Bishan/Ang Mo Kio area, Sentosa and Chestnut Drive to increase about 20-25 per cent, as market values of landed properties in these locations are significantly above the values implied by prevailing DC rates.
JLL reckons that after a 42 per cent spike in the average commercial-use DC rate on Sept 1 last year, the rate could still rise a further 30-35 per cent come March 1. However, it believes rates may generally stay put in the central business district (CBD), and expects increases mostly in suburban locations, particularly in the Jalan Sultan and Toa Payoh areas. In the past few months in these areas, commercial GLS sites have been sold at prices more than double the land values implied by prevailing DC rates.
Agreeing, Credo's Ms Yong sees the islandwide increase in commercial DC rates around 5-15 per cent, with increases mostly outside the CBD.
Market watchers highlight the sharply different top bids for two white sites - with stipulated minimum office components - at Marina View in the CBD sold just three months apart late last year, reflecting how swiftly investor sentiment in the office market turned cautious.
JLL estimates industrial DC rates will appreciate around 30 per cent on average, compared with a 2.2 per cent increase last round. It also expects the average hotel DC rate to go up 30-35 per cent, after a 23 per cent hike last round, pointing out that hotel sites offered under the GLS programme at Upper Pickering Street and New Market Road/Merchant Road have been sold at premiums of 80 and 64 per cent respectively above prevailing DC rate-based land values.
The coming round of DC rate revisions will have 'minimum impact on the already slowing collective sales market', according to Savills' Mr Ming.
But for en bloc sites with a significant DC component, and where the reserve price has been fixed by owners, a substantial DC increase will make it even harder to find takers, says Credo's Ms Yong.
JLL's Dr Chua reckons owners of properties in fast-changing neighbourhoods like Buona Vista and Telok Blangah - and possibly Paya Lebar and Jurong East, which are earmarked by the government for development into business hubs - will be watching the coming DC rate changes as they may set the tone for potential change-of-use applications.
Potential bidders for reserve list sites under the GLS programme will also be watching the revisions to get a sense of the Chief Valuer's sentiment before making any applications for these sites to be released, says Dr Chua.
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