Tuesday, March 1, 2011

Hotel use leads hike in DC rates

THE government yesterday announced the biggest hikes in average DC rates for hotel and commercial uses since 2007.


The increase for landed residential use, at 18 per cent, was the biggest in more than a decade, according to Jones Lang LaSalle's analysis.


Hotel use led the hike in development charge rates which take effect from today.


The average DC rate for this use has escalated about 27 per cent, reflecting the buoyant hotel business and strong bids for hotel development sites in recent months.


As predicted by property consultants, for the residential segment, the authorities have raised the average DC rate for landed use by a bigger percentage quantum than for non-landed use, at 18 per cent and 11 per cent respectively, given the stronger expansion in landed home prices last year compared with condominium/apartment prices.


The government yesterday also announced average DC rate increases of 13 per cent and 8 per cent respectively for commercial and industrial uses.


DC is payable to the state in exchange for the right to enhance the use of some sites or to build bigger projects on them. The Ministry of National Development, in consultation with the Chief Valuer, revises DC rates twice a year, on March 1 and Sept 1. The revisions are based on current market values.


'The DC revision exercise is the Chief Valuer's way of providing a more accurate representation of current land prices,' as CB Richard Ellis executive director Li Hiaw Ho puts it.


Jones Lang LaSalle's South-east Asia research head Chua Yang Liang said: 'The impact of this latest round of revisions is unlikely to dampen or stir market sentiments . . . not every development project will be affected.'


For hotel use DC rates, the biggest increase of 39.3 per cent, according to Jones Lang LaSalle's analysis, was in the Orchard/ Somerset and Tanglin/Cus-caden vicinities - home to many hotels in the shopping belt.


The Robinson Road/Ce-cil Street area, too, saw a 39.1 per cent growth, not surprising given the record hotel land price of $1,072 per square foot per plot ratio (psf ppr) fetched earlier this year for the Ogilvy Centre site. That land bid was 214 per cent above the land value implied by the Sept 1, 2010, hotel use DC rate for the location.


Clarke Quay/Clemenceau Avenue/Havelock Road - where a hotel site was sold in September last year at a land price 98 per cent above its Sept 1, 2010, DC rate implied value - also saw a 39.1 per cent DC hike. Hotel rates islandwide had been left untouched in the previous revision on Sept 1, 2010.


For commercial use, the biggest rise in DC rate of 29 per cent was in the geographical sector that includes the 'white' site above Tanjong Pagar MRT Station which GuocoLand clinched for $1,006 psf ppr late last year.


In the industrial category, the steepest climb was 19.6 per cent, in the geographical sector that includes Tuas, Jurong and Woodlands.


A 30-year leasehold plot at Pioneer Road North was sold by the state in December at a land price which was about 238 per cent above the land value implied by the Sept 1, 2010, industrial use DC rate for the location.


The second highest rate hike for industrial DC rates of 13 per cent was in the Paya Lebar/Ubi area.


As for landed residential use, the steepest hike of 25 per cent was in Sector 108, which covers Holland Road, Sixth Avenue, Eng Neo Avenue, Adam Road and Farrer Road.


Analysts highlighted two Good Class Bungalow (GCB) transactions at 61 Belmont Road and 18 Astrid Hill, at land prices which were at least double the Sept 1, 2010, DC rate for the sector, as likely triggers for the latest rate hike in the sector.


The effect also rubbed off on the neighbouring sectors 68 and 69, which include the Botanic Garden/ Gallop Road and Ridout/ Peirce Hill/Swettenham Road vicinities respectively, each posting a 23.5 per cent increase, based on JLL's numbers.


Increases in landed residential DC rates were recorded in 116 of the total 118 geographical sectors that Singapore is split into for DC computation. Rates were left untouched in Jurong Islands and other nearby islands, and Pulau Ubin/Tekong. The smallest gain of 7.7 per cent was in Sector 67, which includes the Nassim, Orange Grove and Ladyhill locale.


Credo Real Estate managing director Karamjit Singh said: 'Many GCB Areas saw hikes in landed residential DC rates because over the past six months, GCB prices have risen the most among various property types. However the impact of the hikes would not be felt within the GCB market itself since DC is not payable for a plot that is redeveloped into a single dwelling unit such as a bungalow. Rather, the effect is more likely to be felt among developers of other mixed landed properties near the GCB Areas which have seen a DC rate rise.'


For non-landed residential use, the biggest rate hike was in the Punggol/ Upper Serangoon Road area, followed by Braddell/ Potong Pasir/ Bartley and Bishan/Ang Mo Kio. Analysts attributed this to recent sales of sites in these locations, including by the state.

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