The Ministry of National Development (MND) has revised the rates for development charges (DC) for the next six months, as part of its half-yearly review.
The increases in the rate of DC, the tax payable by the developer when a property site is developed into a more valuable project, will take effect from March 1.
On average, the rates for landed residential property have increased by 18 per cent, with the largest increase of 25 per cent in Sector 108, which includes Holland Road, Sixth Avenue, Eng Neo Avenue, Adam Road and Farrer Road areas.
Some analysts, like Ms Callie Liew, COO of the HSR Property Group, said the increase will lead to a corresponding increase in land costs and expect developers will be “more measured” in their bids going forward.
However, other market watchers said the increase in DC rates is unlikely to have a major impact on collective sales.
Dr Chua Yang Liang, head of research, South-East Asia, Jones Lang LaSalle, said: “DC, as a component of overall development charges, is actually quite a small component. And DC charges are only imposed on those developments that have the potential to be over and above what the site has been approved for.”
Analysts estimated that about 50 to 60 per cent of en bloc projects have no development charge component. They said that only projects with a higher development charge component of 5 per cent or more of total land value, such as land sites re-zoned for a different use, will likely feel a significant pinch from the latest increase.
Meanwhile, DC rates for non-landed residential properties have also been increased, by an average of 11 per cent. The largest increase is 17 per cent in Sector 100, which includes Upper Serangoon Road and Punggol.
Analysts said that before the DC rates are revised, the Chief Valuer takes into consideration how the market has behaved over the previous six months.
Dr Chua said: “It depends very much on where the market is heading, whether there are transactions recorded over the next six months. If there are values that rise, then chances are DC rates may rise accordingly.”
The rates for commercial development have increased by an average of 13 per cent, with the largest increase of 29 per cent in Sector 9, which includes Peck Seah Street, Maxwell Road and the Anson Road area.
For hotels and hospitals, the rates have gone up by an average of 27 per cent, while development charges for industrial and warehousing use have been raised 8 per cent on average.
The ministry said the DC rates for other land uses – which include places of worship, open space, agriculture, drain and roads – have not changed. It added that if there is any disagreement over the development charges payable, developers and owners can opt for a case-by-case valuation by its Chief Valuer.
Source : Today – 1 Mar 2011