Non-landed residential DC rates trimmed 0.3% after September review
Sector 112 DC rates fell 7.4% due to the disappointing bid price for Clementi Avenue 1 GLS.
Development charge (DC) rates rates for non-landed residential use fell 0.3% on average following a 5.5% decrease during the March 2019 review in what marks the first back-to-back decline since the Sept 2014-March 2015 review, according to the September review of DC rates released by the Urban Redevelopment Authority (URA).
A 7.4% decline since the last review was recorded in Sector 112, which includes Bukit Batok East Avenue 6, Upper Bukit Timah Road, Clementi Road and West Coast Highway.
Colliers International attributed this to the disappointing bid price for the Clementi Avenue 1 GLS site tender. Accordingly, the bid price of $788.3 psf per plot ratio was below market expectations and significantly below the implied land rate in this sector at $883 psf.
The rate cuts could also be due to muted sentiment in the residential property market, driven by ongoing economic and trade concerns in the region, Colliers reported.
Meanwhile, property developers stand to gain from the rate cuts. “The trimming of the DC rates for non-landed residential use in this review should be modestly comforting for property developers who have had to grapple with more uncertainties following the roll-out of new cooling measures in July 2018,” said Tricia Song, head of research for Singapore at Colliers International.
Furthermore, DC rate in Sector 34 fell 6.5% with an implied land rate of $1,347 psf. The area includes Sophia Road, Upper Wilkie Road and Mackenzie Road.
“This could be due to the collective sale of Sophia View in July 2019, whose price was not revealed but likely below expectations,” Song noted.
DC rates are reviewed on a half-year basis and are payable when planning permission is granted to carry out development projects that increase the value of the land; for example, rezoning to a higher value use or increasing the plot ratio.
Overall, DC rates were notably reduced for the next six months, which Huttons found “hardly surprising”.
“Sectors where DC rates were reduced saw soft land prices over the six month period from March 2019 to August 2019,” said Sze Teck Lee, director for research at Huttons Asia.