Small Development Tax Increase Sign Of Property Slowdown

Source : TODAY, Weekend, March 1, 2008

In the latest signal that the market for private homes has cooled, the Ministry of National Development (MND) yesterday announced minimal changes in the development charges for residential sites.

A tax on property developers for site enhancement, the development charges payable in the next six months for non-landed residential sites were raised on average by a marginal 2.6 per cent.

The latest hike, which the MND said was calculated after having "taken into account current market values" following a half-yearly review, compares with a 58-per-cent rise in the same category last September.

On average, development charges were raised 1.5 per cent for commercial sites such as those for offices and shopping centres, 3.3 per cent for hotel and hospital sites and 16.8 per cent for industrial and warehouse sites. Charges in the other categories, including landed residential, remained unchanged.

"It is encouraging to know that the Government has made minimal changes to the development charges for residential use, a reflection that it is mindful of the current market sentiment and the uncertainties ahead," said Mr Li Hiaw Ho, executive director of CBRE Research.

Mr Donald Han, managing director of Cushman and Wakefield, attributed the virtually "flat" rates to the lacklustre market for private homes, as well as sales of residential sites, in recent months. He noted that the property market started deteriorating in December as sentiment turned cautious amid uncertainty over the extent of the fallout from the sub-prime crisis in the United States and stock market volatility.

Statistics from the Urban Redevelopment Authority showed that the number of new private homes sold in December shrunk by half from the month earlier, while January numbers were flat. Fewer units were also launched by developers in the past two months.

The double-digit rate of increase in development charges for industrial sites was "a good indication of healthy demand for such land as well as a continued stream of foreign investments into Singapore's manufacturing sector", said Mr Li.