Tuesday, March 1, 2011

Development charges rise across sectors

THE rebounding property market has led the Government to jack up the charges developers have to pay when they enhance the use of a plot of land.

The new development charges (DCs), which take effect today, reflect higher property values of residential and commercial land over the past six months.

Residential areas like Farrer Road and Punggol, which are near MRT stations or other developing infrastructure, have been hit with particularly hefty fee increases.

Commercial land has seen the biggest rise in DCs in 31/2 years, said CB Richard Ellis Research executive director Li Hiaw Ho. 'This is the first time since September 2007 that such hefty increases in DC rates were imposed, reflecting the sharp turnaround in the economy as well as land values.'

The landed homes segment has seen fees rise an average of 18 per cent - the largest increase since the DC process started in March 2000.

The steepest hike of 25 per cent was in the Holland Road, Sixth Avenue and Adam and Farrer road areas, possibly due to the imminent completion of new MRT stations.

Average fees for the non-landed homes segment rose by 11 per cent, but the Upper Serangoon and Punggol areas had increases of 17 per cent.

Experts say this could be due to rising land prices of government sites sold there in the second half of last year.

They add that the increases are supported by the Government's intention to develop the Punggol area.

Jones Lang LaSalle's South-east Asia research head, Dr Chua Yang Liang, cited December's sale of a 99-year leasehold private condominium plot at the junction of Punggol Central and Punggol Walk for $406 per sq ft (psf) per plot ratio (ppr) as an example of how developers jostling for a piece of the new town are sending prices upwards.

Fees for areas that include Bishan, Braddell and Potong Pasir were also raised by 15.4 per cent.

The new Circle Line and the recent sale of a Bishan site for $869 psf ppr have indicated developers' confidence in the area's potential.

DCs, which are adjusted every six months, can run in the millions of dollars and are set by the chief valuer based on recent land and property values.

They apply at varying levels across 118 geographical sectors - in the sectors of hospital, hotel, office, industrial and residential.

This year, the charges rose in all the main sectors.

Experts say the increases reflect property market trends over the past six months.

Dr Chua said DC rate revisions were strongest in places where there were strong government land sales, such as the commercial sector around Tanjong Pagar and Punggol's non-landed residential segment.

'The impact of this latest round of revisions is unlikely to either dampen or stir market sentiments. The DC is not a large proportion of the overall development costs, and therefore the impact on the eventual selling price will be muted,' he added.

The hotel and hospital sector, which has been boosted by strong tourist arrivals, had an average DC rise of 27 per cent - although eight sectors covering the Church Street, Clemenceau Avenue, Somerset Road and Tanglin Road areas saw fees shoot up 39 per cent.

The commercial sector had an average increase of 13 per cent, with the sharpest gain of 29 per cent registered in the Tanjong Pagar area.

Mr Li of CB Richard Ellis Research noted that the commercial segment averaged increases of 12.7 per cent this time, compared with an average 0.8 per cent increase last September.

He also said that this hike could be substantiated by the mixed-use land parcel at the junction of Peck Seah and Choon Guan streets that was sold in November for a whopping $1.71 billion.

The industrial and warehousing sector had averaged increases of 8 per cent, although the rates have shot up 20 per cent in Tuas, Jurong and Woodlands.

No comments:

Post a Comment