Development charges dip for non-landed residential use _ST 01.03.2012

Development charges dip for non-landed residential use

 

THE charges that developers pay to enhance the use of a plot of land have finally been reduced or left flat for some sectors, as the slowing property market takes its toll.

The new development charges, which are reviewed every six months, were released yesterday and reflect recent land and property values for the varying market segments.

They take effect today and are applied when the value of a site is increased because of re-zoning or when a taller building can be erected following a change in the plot ratio.

Development charges for the residential non-landed sector have been cut by 3 per cent on average on the back of cautious land bids by developers in the past six months.

This is the first time the charges have come down in more than two years.

The residential non-landed sector last posted a drop in September 2009, dipping 2 per cent, and fell 15 per cent in March of the same year during the global financial crisis.

The biggest drops - the cut was 14 per cent - for the residential non-landed sector occurred in Punggol town and the Upper Serangoon Road area and the areas of Hougang, Upper Paya Lebar Road, Toa Payoh and Bishan.

Charges on commercial land have been increased by 6 per cent on average, and 15 per cent for the hotel and hospital sector.

But rates for commercial land in the Sengkang and Seletar areas have shot up 52 per cent, likely due to the sale of a retail site in Sengkang West Avenue with a winning bid of $1,155 per sq ft per plot ratio in January. This bid price is almost 300 per cent more than the land cost implied by the previous development- charge rate, experts noted.

However, rates for residential landed and industrial and warehousing uses were unchanged.

Experts say that the drop in development-charge rates for non-landed residential use is in line with market expectations.

'Despite healthy buying momentum in the mass market... factors including an ample land supply, concerns of a slowing economy and the possible bearing of the additional buyer's stamp duty on the market have resulted in developers becoming more cautious in bids,' said Ms Chia Siew Chuin, director of research and advisory at Colliers International.

For example, four non-landed residential sites in the Upper Serangoon and Punggol areas were awarded from September to December last year at prices that were 5.4 per cent to 22 per cent lower than the prevailing imputed land value for the sector, she added.

The development-charge rate for non-landed residential use had also increased strongly in the three previous DC rate announcements - by 13 per cent, 11 per cent and 12 per cent - SLP International research head Nicholas Mak said.

'The increases were not sustainable and the change in market sentiments in the past six months had reversed this increase,' he added.

While there had been expectations of lower development-charge commercial rates for the central business district due to weakening rents in the last quarter, Ms Chia said the unchanged rates are still likely to be welcomed as the performance of the office sector was generally subdued during the review period.

Development-charge rates for the industrial sector also surprisingly held firm despite strong demand for property in recent months.

Jones Lang LaSalle's head of research, Mr Chua Yang Liang, noted that this could imply that the Chief Valuer believes 'such market exuberance in the industrial market is unsustainable, especially in the light of industrialists' concerns over the recent rise in rents as well'.

Development charges can run into the millions of dollars for individual projects. They apply at varying levels across 118 geographical sectors covering hospitals and hotels, commercial, industrial and residential.

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