Increase in DC rates for non-landed and landed residential homes

Developers will have to work in higher costs for new projects, as the development charge (DC) rates for both non-landed and landed residential homes have been increased.

They have gone up by an average of 13 per cent.

This is largely within market expectations, given the broad-based recovery in the property sector.

But the announcement comes one day after the government announced new measures to cool the property sector.

And analysts said this will cause developers to be more measured in their land bids and also in the en bloc market.

The residential sector is leading the increase in DC rates.

This is the tax payable by the developer when a property site is developed into a more valuable project.

This allows the government to have a share of the gains from the enhanced value.

Landed homes will see the average rates go up by 13 per cent – with the Sentosa area seeing the biggest jump of 36 per cent.

Meanwhile, the rates for non-landed residential use will also climb by 13 per cent.

The largest increase of 28 per cent will apply to city fringe areas like Tanjong Rhu, Farrer Park and Balestier.

The opening of the Circle Line has also pushed DC rates up for some locations. They included Braddell, Upper Aljunied, Bishan and Ang Mo Kio.

Analysts said this revision in DC rates is unlikely to have a significant impact on the property market. And what developers will be watching is how potential home buyers react to the slew of policy changes introduced by the government to rein in property prices.

Chua Yang Liang, head of research, Southeast Asia, Jones Lang LaSalle, said: “The DC rates component in most en bloc deals is usually quite small. The component is just about 5 to 10 per cent of the total cost.

“But going forward, because of the policies that have been effected today, I think the level of collective sales may see a bit of a slow down going forward, where developers may take a wait-and-see approach before they embark on new purchases.”

Meanwhile, the DC rates for commercial sites will increase by 1 per cent on average, with Jurong Lake District rising by 25 per cent.

Going forward, analysts said the rates could be a tad lower due to the policy changes, but some sectors will do better.

Dr Chua said: “The key impetus would probably be the IR (integrated resort); now it is in semi-completion state, so with further completion, say after the Circle Line comes in, the rest of the project completing, I think you can expect some revision in the Marina area going forward.”

The average DC rates for industrial use will rise by 10 per cent, with the Woodlands and Yishun area registering the largest increase.

In a statement, the National Development Ministry added that the DC rates for business zone commercial use have not changed significantly, while the levy for the remaining groups are unchanged.

The change in DC rates will take effect from September 1.

Source : Channel NewsAsia– 31 Aug 2010

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