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News Release


JLL’s perspective: Revision of development charge rates for the period 1 March 2015 to 31 August 2015

Further decline in Non-landed Residential Development Charge rates while Commercial use group increased at an average of 1.9 per cent  

SINGAPORE, 27 February 2015 – The latest revision of the Development Charge (DC) rates effective 1 March 2015 to 31 August 2015 saw further decline in the Non-Landed Residential Use Group B2 (at an average of -3.2 per cent) following the average decline of 1.6 per cent in the September 2014 revision. Commercial sector on the other hand increased again at an average of 1.9 per cent, despite limited investment activities in this asset class. DC rates for the remaining Use Groups, including Landed Residential (Use Group B1), Hotel / Hospital (Use Group C) and Industrial (Use Group D) remain unchanged. The overall revision comes on the back of continued weakening in the overall market against the backdrop of the strict credit tightening and anti-speculative measures that effectively reduced both transaction prices and volumes.

The decrease in DC rates for the Non-Landed Residential Use Group fell within our expectations, considering the weaker residential market that has kept developers' bids down in recent government land sales. However the decline was only to 62 per cent of the sectors while the other 45 sectors remained flat. The largest drop in the Punggol/Teban area (sector 100) was possibly due to the weaker sales price that the recent Government Land Sale (GLS) site at Anchorvale Crescent fetched. The winning price stands 35 per cent below the implied land value based on the DC rate for sector 100, which is quite significant even for an Executive Condominium (EC) site. In fact this bid price is some 24 per cent lower than the adjacent site that was sold a year ago on 19 Feb 2014, which received 12 bids compared to only three bidders for this site.

To our surprise, DC rates for Use Group D – Industrial – remain unchanged since March 2014. The market expected Industrial DC rates to rise on the back of empirical evidence showing upside in land values especially in Sector 114, where almost 80 per cent of GLS sites sold in this sector were 30 to 75 per cent above the implied land value. 

The commercial upside is a surprise although only 26 per cent of the sectors recorded upside revision. The bulk of the increase came from within the CBD and fringe area of the CBD despite the lack of major transactional evidence. Dr Chua Yang Liang, Head of Research for South East Asia says: "Interestingly, most of the large increases occur in sectors with a presence of shophouses. This type of real estate has caught the attention of investors and prices have been on an upward trend of late. This is possibly one factor that has motivated the significant increase in commercial rates in these sectors." 

"While the change in DC rates may not have significant impact on development in general, it does reflect the dissonance in the wider property market. This divergent trend between the residential and commercial markets is likely to continue into 2015 but the dissonance should gradually diminish as the large office supply weighs in," he added. 

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