Average development charge rate for landed residential jumps 4.8%, while non-landed sees moderate 0.3% increase
The Ministry of National Development (MND) has announced the latest revision of the development charge (DC) rates for the six-month period this year from March 1 to Aug 31. Development charge is a tax that is levied when planning permission is granted to carry out development projects that increase the value of the land, such as rezoning to a higher use or increasing the plot ratio.
The average DC rate for landed residential land increased 4.8%. In contrast, the previous six-month period saw the DC rate for this segment increase by 3.6%. The largest DC rate increase came from the geographical sector covering Cluny Road, Napier Road, Tanglin Road, Anderson Road, Stevens Road and Dalvey Road, which jumped by 10%.
Wong Xian Yang, head of research Singapore at Cushman & Wakefield (C&W), says the demand for landed properties continues to be “supported by strong demand driven by strong wealth inflows and wealth creation effects.” The landed market is also fairly insulated against the latest property cooling measures that were rolled out in December last year. This is because the market is driven by owner-occupier
demand and would see limited impact from the increase in Additional Buyer’s Stamp Duty (ABSD) rates, adds Wong.
The average non-landed residential DC rate also marginally increased by 0.3%. Only six geographic sectors saw an increase in the DC rates ranging from 3% to 15%, while the DC rates in the other sectors remained unchanged. The sector covering Guillemard Road, Mountbatten Road, Old Airport Road, Dunman Road, Tanjong Katong Road, Haig Road and Geylang Road saw the largest increase of 15%.
Nicholas Mak, head of research and consultancy at ERA Realty Network, says the increase in the DC rate
for this particular sector is due to the bullish land bids in recent months. For example, the government land sales site at Jalan Tembusu attracted a top bid of $1,302 psf per plot ratio (ppr) from City Developments in January, while the en bloc sale of 25 houses along Thiam Siew Avenue at $1,440 psf ppr by Hoi Hup and Sunway was another contributing factor.
“The modest hike in DC rates for non-landed residential use groups is a relief to the property market that is still sizing up the impact of the December 2021 cooling measures,” says Tay Huey Ying, head of research and consultancy at JLL Singapore.
She adds that the collective sale market will remain well supported by developers who are eager to replenish their land banks given that unsold new private home inventory has declined to an all-time low of 14,333 units as of the end of last year. However, developers are expected to remain highly selective given the higher ABSD rates, rising interest rates and higher construction costs, notes Tay.
The average DC rates for commercial areas increased 0.7%. The increase in DC rates for this segment were mostly concentrated around Raffles Place and Tanjong Pagar. Commercial DC rates in these areas rose between 2.6% to 3.2%. Other localities in the city-fringe and suburban locations remained flat.
“The upward adjustment of 0.7% was not surprising, given the higher level of commercial transactions taking place, with a number of CBD office and commercial assets transacted,” says Catherine He, head of research at Colliers Singapore.
Meanwhile, the average DC rate for industrial use increased by 2.2% and this marks the first increase in the rate for this sector since September 2018. The increase comes on the back of healthy investment sales of industrial properties with industrial investment sales clocking in at about $4.4 billion for the whole of 2021, says C&W’s Wong.