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DC rates revision reflects property market sentiments

by • September 3, 2019 • Property RegulationsComments (0)143

The Ministry of National Development announced the DC rates revision on Aug 30.  The Development Rates (DC) rates revision is for the period 1 September 2019 to 29 February 2020. The DC rates revision is carried out on a half-yearly basis in consultation with the Chief Valuer.

The DC rates for Use Group A (Commercial) have increased; while the DC rates for Use Group B2 {Residential, (non-landed)} have decreased. The DC rates remain unchanged for Use Groups B1 {Residential, (landed)}, C (Hotel/Hospital), D (Industry), E (Place of Worship / Civic and Community Institution), and 3 other Use Groups F, G and H.

The DC rates for Use Group A (Commercial) have increased by 1.7% on average. 59 out of the 118 sectors have increases in DC rates ranging from 3% to 7%. There is no change to the DC rates for the remaining 59 sectors. The largest increase of 7% applies to the following sectors:

  • Sector 100 (Tampines Road / Hougang / Punggol / Sengkang area)
  • Sector 105 (Ang Mo Kio / Yio Chu Kang / Seletar area)
  • Sector 112 (Pan-Island Expressway / Bukit Batok East Avenue 6 / Upper Bukit Timah Road / Clementi Road / West Coast Highway / Penjuru Road / Jalan Buroh / Jurong East Area)

The DC rates for Use Group B2 {Residential, (non-landed)} have decreased by 0.3% on average. 7 out of the 118 sectors have reduction in DC rates ranging from 4% to 7%. Rates are unchanged for the remaining 111 sectors. The largest decrease of 7% applies to the following sector:

  • Sector 112 (Pan-Island Expressway / Bukit Batok East Avenue 6 / Upper Bukit Timah Road / Clementi Road /
  • West Coast Highway / Penjuru Road / Jalan Buroh / Jurong East Area)

There are no DC rates revision to the Use Groups Table and the Geographical Sector maps.

DC rates revision

MND said that the DC rates revision will apply to cases which are granted Provisional Permission (PP) or 2nd and subsequent extensions to the PP on or after the effective date.

If there is any disagreement over the DC payable for any development proposal calculated based on the rates under the respective Use Groups, developers and owners can opt for a case-by-case valuation by the Chief Valuer, as provided for in the Planning Act.

Commenting on the DC rates revision, Colliers International said broadly speaking, the DC rates revision for the commercial and residential (non-landed) property segments was within expectation, reflecting the ongoing market sentiment and activity in the last six months.

“In particular, we note that the DC rates for hotels remain unchanged – this follows a sharp hike of 45.6% on average in the last revision – and we believe this could be partly due to the lack of significant hotel transactions in the last few months. While investors are still interested in hospitality assets, the 45.6% hike in DC rates for hotel use since 1 March 2019 proved to be too punitive for hotel land deals. Hotel transactions since then have focused on income assets, such as Bay Hotel, Ibis Novena and a stake sale in Marina Mandarin. In addition, hotel statistics have not been too bullish. Year-to-June tourist arrivals grew just 1.35% to 9.32 million while hotels’ REVPAR (Revenue Per Available Room) was flat at SGD183.9 (-0.2% YOY).

Development charges – with rates revised on a half-yearly basis – 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 and/or increasing the plot ratio.

DC rates for commercial use have increase by an average of 1.7%, with the sharpest increase of 7% seen in areas including Tampines Road, Ang Mo Kio, and Upper Bukit Timah Road (Sectors 100, 105, 112). This is the seventh consecutive increase in commercial DC rates since the September 2016 review.

DC rates at Sector 51 (North Bridge Rd, Beach Rd) rose 3.6% to SGD10,150 psm, probably due to the recent Duo Tower and Galleria transaction at SGD2,570 psf.

DC rates at Sector 7 (Cecil St, Robinson Rd, Shenton Way) and Sector 9-10 (Anson Rd, Palmer Rd, Tanjong Pagar Road) went up 2.9-3.1%, probably due to some large-ticket commercial deals in these locations announced over the past six months. These included: Anson House (SGD2,435 psf), 71 Robinson (SGD2,756 psf), and Frasers Tower (50% stake) (SGD2,865 psf).

Meanwhile, the DC rates for non-landed residential use have fallen by a marginal 0.3% on average, with the largest decrease witnessed in Sector 112, which includes Bukit Batok East Avenue 6, Upper Bukit Timah Road, Clementi Road and West Coast Highway.

This comes after a 5.5% decrease in DC rates during the March 2019 review, and it is the first successive back-to-back decline since the Sept 2014/March 2015 review. We believe the cut in rates is reflective of the relatively muted sentiment in the residential property market and general outlook which is stymied by concerns such as the US-China trade dispute and slower global economic growth.

In addition, 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.

DC rate in Sector 112 declined 7.4%. This could be due to the disappointing bid price for the Clementi Avenue 1 GLS site tender which closed on 3 July. The bid price of SGD788.3 psf per plot ratio was below market expectations and significantly below the implied land rate in this sector (SGD883 psf before 30 August 2019).

DC rate in Sector 34 which includes Sophia Road, Upper Wilkie Road and Mackenzie Road fell 6.5% to an implied land rate of SGD1,347 psf. This could be due to the collective sale of Sophia View in July 2019, whose price was not revealed but likely below expectations.”

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