Across-the-board rises in development charge rates may backlash on enbloc transactions:DBS

Rising land costs and the limited ability to raise ASPs in the near term could erode margins.

According to DBS, not surprisingly, the latest development charge rates for the period 1 March 2011 to 31 August 2011 have seen an across-the-board increase in all property segments.

The largest rise came from the hotel segment where DV charges rose an average 27% with popular localities such as Orchard/Clarke Quay/Marina Bay/Sentosa seeing the largest 38-39% hikes. In the commercial land segment, average rate increased by 13%, led by those in the Tanjong Pagar area which increased by 29% while in the Marina Bay area, DC charges have risen by a lesser 18%. Landed residential DC charges grew 18%, the highest semi-annual jump in over a decade, while those in the non-landed segment saw an 11% hike. Industrial DC rates rose by an average 8%.

The latest round of adjustments is likely to have a neutral impact on the property market as well as market sentiment. However, we see some potential backlash to enbloc transactions that require DC payments, including both new enbloc transactions to be put on to the market as well as those which have been recently transacted but have not secured DC charges.

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