Government raises property development charges

The government is raising property development charges with effect from Saturday.

This follows the regular six-monthly review on development charge rates.

For non-landed residential use, the charge was raised by an average of 58 percent with prime areas like Cantonment Road seeing the biggest jump of 112 percent.

For commercial use, the hike is an average of 42 percent.

Market watchers say an increase was expected, but the steep hike is likely to slow down collective sales.

Margate Mansion off Meyer Road in District 15 was sold en bloc on Thursday to Soilbuild Group for S$58 million.

The developer had projected a 20 percent increase in development charge.

But based on the announced rates, the jump is estimated to be about 55 percent – or an additional $2 million.

That means about S$10 million instead of the projected S$7.8 million.

This will work out to about 2 percent of the total development cost which property consultants say is still acceptable.

Nicholas Mak, Consultancy and Research Director, Knight Frank, says: “I think the industry as a whole is expecting an increase in the DC rate but the steep increase that we just saw this evening is probably higher than what most people would have expected. In July, the government adjusted the computation rate and DC rate increased by about 40 per cent across the board.”

The average increase for non-landed residential use this time round is 58 percent.

Cantonment Road will see the sharpest hike at 112 percent followed by the Newton and River Valley at 108 percent and Anson Road at 104 percent.

Analysts attribute the jump to recent en bloc prices of properties like Oakswood Heights at Cantonment and Lincoln Lodge at Newton.

While market watchers expect the new rates to slow en bloc sales, they also note that developers might start looking at non-prime areas.

Mr Mak says: “I think that developers and sellers will have to go back and redo their sums, they’d have to factor in this new reality. Some developers may consider that some of the asking prices coupled with this increase in DC rate may make land prices a bit too expensive. Owners may have to adjust their asking price to see whether it still makes sense for them to proceed with the en bloc sales.”

Meanwhile, commercial DC rates have gone up by an average of 42 percent.

And market-watchers say this could affect plans to redevelop certain commercial buildings.

Areas seeing the highest increase (of over 100 percent) include Telok Ayer, Maxwell, Shenton, Anson and South Bridge Road. – CNA/ch

Source : Channel NewsAsia – 31 Aug 2007

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