Business

Development charge up in some sectors

Strong investment interest in commercial, condominium properties

Development charge (DC) rates for three real estate segments were increased on the back of strong investment interest and an upturn in market sentiment.

The DC rates for commercial, non-landed residential and hotel or hospital uses went up following increases in the last review.

The charges are payable for enhancing the use of some sites, or building bigger projects on them, and are revised every six months.

Most analysts were not surprised by the rate hike for commercial and condominium uses.

"Developers' hunger for prime commercial sites and residential sites has driven land prices further north over the last six months," said Cushman & Wakefield research director Christine Li.

The DC rates for commercial use were raised by 1.3 per cent on average, with the largest jump of 29 per cent in the Shenton Way/Raffles Quay/Marina Bay Financial Centre area.

Analysts said this was underpinned by the recent wave of investor interest in commercial assets, including the record $2.57 billion bid for a white site in the Marina Bay area.

Condo DC rates were up an average of 4 per cent, with the sharpest increase of 17 per cent in two sectors covering areas such as Jalan Besar and Serangoon Road.

The increase was likely influenced by deals such as the sale of a Perumal Road site in Little India and another at 1177, Serangoon Road - both went for premiums over their implied land value, consultancy JLL noted.

The rise in hotel/hospital DC rates in the suburbs could perhaps be seen as a way to address short term stay, such as Airbnb.Chesterton Singapore managing director Donald Han

JLL head of research for Singapore Tay Huey Ying said the rise in condo DC rates is not expected to have a significant impact on the en-bloc market.

What did take consultants by surprise was the rise in DC rates for hotel or hospital sites, given that there was no hotel transaction in the past six months and just one deal involving a nursing home site in Venus Drive.

Hotel or hospital DC rates increased by 2.6 per cent on average, with the steepest rise of 19 per cent in several suburban locations, including Punggol and Upper Bukit Timah Road.

Chesterton Singapore managing director Donald Han said: "The rise in hotel/hospital DC rates in the suburbs could perhaps be seen as a way to address short term stay, such as Airbnb."

But DC rates for industry use were slashed by 3.7 per cent on average.

The largest decline of 14 per cent was seen in sectors comprising areas such as Tampines Road, Boon Lay and Tuas.

The DC rates remained unchanged for other use groups.

The revised rates are effective from today to Aug 31 this year.

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