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DC rates take striking hike in scenic Sentosa

Posted on 27 Feb 2010 | Comments Off

SENTOSA has seen a big jump in development charge (DC) rates, reflecting higher land values on the island following this month’s opening of Resorts World Sentosa (RWS).

On average, the government is raising DC rates (payable for intensifying or enhancing the use of some sites) about 12 per cent for landed residential use from March 1; but in Sentosa, they will climb 17.3 per cent. For non-landed residential use, Sentosa saw a 10 per cent hike in DC rates compared to the average rise of about 8 per cent. And while DC rates for commercial use will be cut roughly 2 per cent on average against the backdrop of weak office rentals, Sentosa is the only location where they will be raised – to the tune of 12.5 per cent.

It is also the only location where the government increased the hotel-use DC rate; the hike was 12.2 per cent. In all other locations, the DC rate for hotel use (which also covers hospitals) was left untouched.

DC rates – which are revised on March 1 and Sept 1 each year – are specified by use groups across 118 geographical sectors throughout Singapore. The review is conducted by the Ministry of National Development in consultation with the Chief Valuer, who takes into account current market values.

Some analysts pointed to an interesting trend emerging in the Central Business District. DC rates for commercial use in the CBD fell further while non-landed residential rates rose and actually surpassed the commercial rates. This could mean paying a higher DC for those who redevelop old CBD office blocks into apartments and could impact such conversions, especially in the case of 99- year leasehold sites as their owners would also want a lease top- up, says DTZ’s South- east Asia research head Chua Chor Hoon.

Jones Lang LaSalle’s SE Asia research head Chua Yang Liang goes a step further, predicting that the new trend could have an ‘unexpected effect of encouraging the redevelopment of existing older office stock into the same office use and discouraging conversions to residential’. Jones Lang LaSalle’s (JLL) analysis showed that DC rates for non-landed residential use were raised for 116 geographical sectors and left unchanged for the remaining two areas.

The biggest hike of 15.4 per cent was seen in three sectors: 91 (which covers the Mountbatten, Meyer and Broadrick areas); 98 (Tampines, Bedok Reservoir, Bedok North, Kembangan); and 101 (Paya Lebar Way/Eunos/Sims Avenue).

This was followed by Sector 76 (Everton/Spottiswoode Park) with a 14.5 per cent increase. Market watchers attribute this to last October’s en bloc sale of Dragon Mansion at a land price about 68 per cent above the land value implied by the prevailing Sept 1, 2009 DC rate for the location.

Also, the geographical sectors covering Serangoon Ave 3, Upper Thomson Rd and Sengkang West Avenue – where residential sites have been sold at bullish prices at state tenders in the past six months – were raised 12.5 per cent, 10.5 per cent and 9.1 per cent respectively.

Colliers International executive director (investment sales) Ho Eng Joo said that overall, the growth in non-landed residential DC rates may hamper developers’ landbanking plans, especially for collective sales sites that require DC payment.

Credo Real Estate managing director Karamjit Singh, however, said yesterday: ‘Three quarters of the en bloc projects our company is working on don’t involve any DC payment. As for the rest, DC as a component of the entire land cost is not very high and hence the increase in DC rates will have minimal impact on the en bloc sale exercise.’

For landed residential use too, charges were raised in 116 sectors and left unchanged in the other two.

Besides Sentosa, other areas with the biggest hikes include Holland/Dunearn Rd/Sixth Avenue (up 17.1 per cent) as well as the Good Class Bungalow areas of Botanic Gardens/Gallop Rd/Tyersall and Ridout/Peirce Hill/Swettenham Road (each up 16.9 per cent), JLL’s analysis shows.

Commercial DC rates were trimmed between 3.2 and 13.3 per cent in 23 sectors. The biggest chop was in the Cecil St/Robinson Road area. There were also cuts in other parts of the financial district, such as Marina Bay, Raffles Place and Fullerton Road, as well as in the Thomson/Moulmein, Newton Circus, Bugis and Tanglin/Cuscaden areas.

Source : Business Times – 27 Feb 2010

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Posted in Property Market / Real Estate, Sentosa Property

Tagged Development Charge, Govt Policy, Property Development, Resorts World Sentosa (RWS), Sentosa

Residential development charges up

Posted on 27 Feb 2010 | Comments Off

New rates reflect improved property market, but commercial site fees dip

THE improved property market has prompted the Government to raise the fees developers pay to enhance the use of residential sites.

The fee – called a development charge (DC) – closely reflects recent land and property values as it is adjusted every six months.

A developer pays a DC if he wants to intensify the use of a site, for instance, by redeveloping an existing project into a bigger one.

Rising values – and developers bidding aggressively for suburban residential land – have forced the Government’s hand, although the increases were mostly within expectations.

From next Monday, the DC will go up by about 12 per cent on average for landed homes and around 8 per cent for non-landed properties. But the rate for commercial sites has dipped given the muted market.

The new rates highlight the rapid rebound in residential property. The DC for landed homes had not been revised for two years, while the non-landed rate was down 2 per cent six months ago.

Experts say the higher charges will add to developers’ costs and could affect collective or en bloc sales and the conversion of office buildings to residential use.

The DC rises vary across the island.

While the average rise for landed properties is 12 per cent, the DC will jump by around 17 per cent in the prime areas of Tanglin, Holland and Bukit Timah, the HDB towns of Hougang, Toa Payoh and Ang Mo Kio, and Sentosa.

The DC for Sentosa rose the most – by 17.3 per cent – this round, supported by the recent strong transaction volume in that area, said Jones Lang LaSalle.

The largest rise in the non-landed homes sector will be a hike of 15 per cent in the mass-market areas of Mountbatten and Katong, as well as in Paya Lebar, Eunos, Bedok North, Simei and Tampines.

The central areas of Spottiswoode Park and Cantonment, Orchard Road and Sentosa Island also saw double-digit rises, because of surging prices and some recent land acquisition activity.

‘Overall, the rise in non-landed residential (development charge) rates is expected to add to developers’ land banking costs – particularly for collective sale sites that require payment (of the charge),’ said Colliers International’s executive director of investment sales, Mr Ho Eng Joo.

This may hamper or derail their land banking plans, he added.

It is a different story in the commercial sector, where DCs will go down 2 per cent on average, with the exception of booming Sentosa, where the rate will go up by 13 per cent.

Rates will fall by up to 13.3 per cent around Raffles Quay and Shenton Way.

The dip for commercial property will be welcomed. The office sector has been subdued, land sales during the review period have been muted and the business environment is still uncertain despite signs of recovery, said Colliers International.

The Central Business District (CBD) will also see the completion of about 2.2million sq ft of office space this year, raising the real threat of a damaging oversupply.

‘A cut in DC rates in these locations will hence provide the necessary stabilising effect to the market, amid daunting concerns about the potential supply,’ said Mr Ho.

Consultants also noted that the fall in commercial DC rates in the CBD will be met with a rise in residential rates.

‘This would affect the conversion of office buildings to residential uses in the CBD, especially those on leasehold land as they would also have to top up the lease,’ said DTZ’s head of South-east Asia research, Ms Chua Chor Hoon.

There are a number of players that are keen to convert and they will have to recalculate their sums as the DC rates have increased, said Mr Ho.

Sentosa is the only area of the country that registered a rise – of 12 per cent – in the DC for the hotel and hospital sector, which will remain untouched everywhere else.

Sentosa is paying the price of the integrated resort, which has pushed up values and, hence, the DC increases in the landed residential, commercial and hotel/hospital sectors, said Ms Chua.

The National Development Ministry sets the rates every March and September in consultation with the Chief Valuer.

Source : Straits Times – 27 Feb 2010