Skip Ribbon Commands
Skip to main content

News Release

Singapore

JLL’s Perspective: URA’s revision of development charge rates for the period 1 September 2014 to 28 February 2015

First decline in Residential DC rates after three years while hotel and commercial use groups increased at an average of 9.1 per cent and 1.9 per cent  


​​SINGAPORE, 29 August 2014 – The latest revision of the development charge (DC) rates effective 1 September 2014 to 28 February 2015 witnessed residential use group declining (average of -1.6 per cent) for the first time in three years. Commercial sector (1.9 per cent on average) on the other hand continue to rise albeit moderately. The overall DC rate adjustments in September 2014 have been unsurprising to say the least. Other than hotel which recorded the highest average increase of over 9 per cent, most other sectors saw tepid increases, echoing the overall weaker market since the introduction of several rounds of state cooling measures.

The adjustment in DC rates for the commercial segment is within market expectations. The lack of sufficient development land sales resulted in adjustments only in key locations. For instance, sector 59 (Balestier) saw the highest percentage increase (11 per cent) in the development charge rates, following the 20 per cent increase in the previous round of revision. The continual growth in DC rates is reflective of the frequent sales of strata units in Balestier Towers, reportedly for the purpose of redevelopment, since July 2013. As knock-on effects, the neighbouring sectors of 58, 60, 61 and 62 experienced increases ranging from 8 to 10 per cent. Sector 115 (Woodlands) saw similar changes (10 per cent), supported by the recent sale of the Woodlands Square office GLS site.  

Despite the limited transactional evidence, residential other than landed, registered decline of -2.8 to -5 per cent. This however, echoes the decline of 2.3 per cent in the URA island wide property price index (PPI) since 1Q14. Interestingly, the largest decline of -5 per cent is in the Rest of Central Region (RCR) – Sector 86, also corresponds closely to the -3.7 per cent correction of the PPI in RCR. While transactional evidence from the sale of the site at Prince Charles Crescent suggests a slight premium of 5 per cent over the previous DC implied land value, further analysis revealed that the lower-than-expected price of S$820.7 psf ppr was in fact a significant discount of 14.6 per cent when compared to the land rate of S$960 psf ppr paid by a neighbouring GLS site that was tendered in September 2012. This could have encouraged the Chief Valuer to apply a discount of 5 per cent to DC rates for non-landed residential use class in the Central region.

Unexpectedly, for the hotel use group, rates have increased on average 9 per cent island-wide, despite the low sales activity of this asset class after a landmark year of transaction in 2013. Also, DC rates in the use group E for civic and community purpose has seen island-wide increase of 8 per cent to 11 per cent - a first after five years. We believe that the upward revision in both use group C and E is for overall harmonisation of the DC rates with other use groups across the island.    

Tan Hong Boon, Head of Land and Collective Sales at JLL said "The recent changes are within expectations. The weaker market conditions have largely keep values in check with tepid growth in some clusters. The Chief Valuer recognises this as reflected in the downward adjustment to residential rates."

Dr Chua Yang Liang, Head of Research South East Asia said "The last time commercial rates increased at sub 2 per cent was in 2007, and this is the first time that we have seen residential rates decline after three years. The last time residential rates declined was in March 2012, at about 3 per cent . While this recent decline is modest in comparison, it mirrors what we have seen happening in the wider residential market, where prices as measured by URA Islandwide Property Price Index has declined by up to some 3.7 per cent since 1Q14."

He added that, other than residential (B1 and B2) and industrial which remained flat, all other use class registered increases in Sector 59 which includes the Novena vicinity. This could have been triggered by the recent strata sales of Balestier Towers and also the continual improvement to the medical facilities and infrastructure in this area.​

​-end-