See why DC rates spiked in hotel and commercial sectors

Colliers International rationalizes upward adjustments.

The commercial sector emerged with the largest upward adjustment of 14.6% on average, with the increases ranging from 13.6% to 28.6% in a majority of 89 sectors. The DC rates for commercial use in the remaining 29 sectors remain unchanged, with the biggest hike of 28.6% found in Sector 108 (Holland Road/Farrer Road/Queensway/Bukit Timah).

Colliers International said the overall nascent recovery of the office property market and a brighter outlook for the sector going forward could have prompted the authority to adjust the DC rates upwards.

Meanwhile, for the revision of DC rates in the hotel sector averaged 13.4% increase across a total of 116 sectors with the largest hike of 30.8% in Sector 93 (Haig Road/East Coast Road/Changi Road) and Sector 94 (East Coast Parkway/Marine Parade).

The steep upward revision of 30.8% in Sector 93 was largely supported by the sale of a state land on East Coast Road for $1,326 per sq ft per plot ratio, 128.8% above the current imputed land value, said Colliers International.

Here's the rest of the comments from Colliers International on the DC rates for non-landed residential, landed residential and industrial sectors:

Non-landed Residential. The revision of DC rates in the non-landed residential sector averaged a mere 1.0%, with the majority of 103 sectors left untouched. This is not surprising, as the URA non-landed residential price index softened by a marginal 0.3% in 2H 2013, compared to the 2.2% growth in 1H 2013 – reflecting a halt to overall price increases on a general islandwide basis and a slowdown in the wider private residential market due to the combined effects of the Government’s cooling measures, especially the Total Debt Servicing Ratio (TDSR).

The upward adjustments in DC rates were seen in 15 sectors, ranging from 5.5% to 9.6%, with the steepest hike in Sector 101 (Paya Lebar/Aljunied/Macpherson/Sims Avenue/Eunos Link). This increase could have been supported by the sale of a state land located on Geylang East Avenue 1 (Sector 101) that was sold in January 2014, which achieved a land price of $776 per sq ft per plot ratio – 67.3% above the imputed land price.

The increase of 9.1% in Sector 100 (Sengkang/Punggol) could have been influenced by the sales of two adjoining state lands located on Upper Serangoon View on December 2013 for $522 per sq ft per plot ratio each, reflecting 33.1% above the imputed land price.

Landed Residential. Similarly, the revision of DC rates for landed residential use remained flat for 105 sectors. The increase in DC rates by an average of 1.1% was seen in just 13 Sectors. Similar to the non-landed segment, this is largely in line with the URA’s price index for landed homes, which slid 0.7% in 2H 2013 compared to the 0.8% rise recorded for 1H 2013.

The largest increase of 10.4% in Sector 100 (Sengkang, Punggol) and Sector 102 (Macpherson, Aljunied), could have been due to pockets of individual landed home transactions that still managed to sell with substantial price premiums in the last six months.

Industrial. DC rates remained unchanged for the industrial sector, despite that various land transactions for the use group during the review period pointed to DC rates trailing behind land prices.

For instance, transaction evidences between September 2013 and February 2014 showed the prices of the 15 industrial land sites already sold by the State were 18.3% to 73.4% higher than the land values implied by the prevailing DC rates effective from September 2013. A Business 2–White site located in Tai Seng Street in DC Sector 103 was sold at $271 per sq ft per plot ratio, 73.4% above the existing imputed land value implied.

Also notable is the demand for small, short-tenure sites from end-users in Tuas South. Compared to the land value imputed from the prevailing DC rate for Sector 114 (Tuas, Lim Chu Kang, Choa Chu Kang, Kranji), the transacted land prices of industrial GLS sites sold in the sector during the review period are about 43.7% to 61.4% higher.

Nonetheless, the industrial property market had begun to show signs of softening. The effects of the TDSR have recently dented industrial property price increases in the industrial sector – the All Industrial Price Index dipped by 0.6% in 2H 2013, compared to the 3.8% increase in 1H 2013. And coupled with the substantial upward adjustments amounting to an average of 15.4% seen at the September 2013 DC rate review, it could have convinced the reviewing authority to leave DC rates in Use Group D unchanged for the time being.

Furthermore, JTC Corporation has also continued to maintain its land rents for the current period commencing from 1 January 2014, amid mixed manufacturing performance.