Development charges cut for non-landed residential sites
SINGAPORE — Charges that developers have to pay to enhance the use of land will be lowered for one-third of the geographical sectors in the non-landed residential segment for the next six months, a call that analysts say is reflective of the softening property market .
The development charge (DC) rates for non-landed residential sites will drop by between 2 and 4 per cent for 39 of 118 sectors in the period from March to August, compared with the previous six months, the Urban Redevelopment Authority (URA) said today (Feb 29). Rates are unchanged for the remaining 79 sectors.
The largest decrease of 4 per cent is seen in areas such as Stevens Road, Grange Road, Commonwealth Avenue, Upper Bukit Timah Road and Sentosa.
“The decrease in prices is in line with the softening real estate market. Property prices have been treading downwards … The adjustment of prices is good for developers, it will provide cost savings,” said Mr Eugene Lim, key executive officer at property agency ERA.
Development charges are taxes levied when planning permission is granted to carry out development projects that increase the value of the land, for example, by rezoning to a higher value use or increasing the plot ratio. They can have an impact on the break-even cost of projects and earnings of developers.
The Ministry of National Development conducts its review of the rates twice a year in consultation with the Chief Valuer.
Ms Christine Li, research director at property firm Cushman and Wakefield, said the 4 per cent cut in DC rates for some of the non-landed housing sites is reflective of the price correction in the prime market.
“Non-landed resale prices fell to S$1,539 psf in the third quarter of 2015 and S$1,580 psf in the fourth quarter of 2015, down by 6 per cent and 3.5 per cent respectively from the second quarter. Together with increasing vacancy rates, softening rents, and a relatively high volume of unsold units (6,394 unsold units in the Core Central Region (CCR), the prime residential market is unlikely to recover in the near term with various government cooling measures still in place,” she said.
Besides the non-landed residential segment, DC rates for commercial land use, hotel/hospitality as well as industry were also lowered by an average of 2 per cent, 2 per cent and 3 per cent, respectively.
“For Use Group A (Commercial), both the office and retail markets are under pressure from the demand and supply imbalance. Occupier statistics have shown that rental values for both markets have softened,” said Mr Desmond Sim, Head of Research, CBRE. “For the industrial use group, some sectors saw two consecutive corrections in their DC rates, underscoring the overall continual weak occupier market.”
