Latest land fees show suburban market heat vs prime coolness

The new land betterment charges (LBCs) announced on Thursday (Feb. 29) show the divergent performance and sentiment of the private condominium market, which is divided between suburbs and prime locations.

Property analysis shows that the sharpest cut of 19.2 per cent for LBC rates for non-landed residential use was in the Tanglin/Cuscaden area, followed by chops of 18.8 per cent in the Ardmore/Draycott/Claymore area, Orchard, One Tree Hill, Paterson/Lengkok Angsa and Nassim/Orange Grove/Ladyhill/Fernhill areas.

The Braddell/Toapayoh area saw a 10.7 percent increase in LBC rates, while the West Coast/Clementi region saw a 14 per cent hike.

Property researcher for Singapore said the polarised performances reflected the differing sentiments seen between suburban and non-suburban land sites at state tenders in the past six month.

The lower-than expected bids on the prime Orchard Boulevard property brought down rates in its immediate surroundings, while the higher-than-expected offers for ToaPayoh and Clementi sites increased rates for those sectors.

Market watchers have noted that the divergence between suburbs and prime areas is due to the doubled rate of additional buyer’s Stamp Duty (ABSD) on private homes purchased by foreigners in Singapore. This was implemented in April last. Foreign buyers traditionally dominated the prime residential real estate market in Singapore.

Developers pay a LBC to have the right to improve the use of certain sites or build larger projects on them. The rates are published twice a year on March 1 and September 1, after a review of the Singapore Land Authority’s (SLA) assessment, in consultation with its chief valuer.

The latest revision saw an average increase of just 0.1% in LBC rates for residential non-landed use.

LBC rates are calculated based on CV’s land value assessment and include recent land sales. The rates are based on 118 different geographical areas in Singapore and are grouped according to their use.

The rates for non-landed residential LBCs increased in 37 sectors. These increases ranged from 3 to 14 percent. In 27 sectors, rates dropped between 1 and 19 percent. SLA stated that the rates for the 54 remaining sectors remained unchanged.

Analysts do not expect the downward revisions of LBC rates for selected geographic sectors to boost residential collective sale because there are other obstacles. Analyst also cited buyer-seller prices, developers’ low appetite for risk and property cooling measures.

LBC rates have increased by an average of 3.8 percent. This may be due to investors returning interest in assets that have a significant commercial component.

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In 104 of 118 geographic sectors, the LBC rates for commercial use have increased by 3 to 9 percent.

Property watchers have attributed these increases to some large office and retail transactions such as Far East Shopping Centre or Shenton House. This could dampen the mood for commercial collective sales.

LBC rates for residential land use increased by an average of 7.8 percent. In 116 sectors, rates increased between 7 and 8%; in the other two sectors, there were no changes.

The property consultancy believes that boutique developers’ newly built landed homes, despite their high costs due to the increased material and construction, are still attractive to buyers compared to the option of renovating older properties.

LBC rates have increased by an average of 0.7% for the hotel and hospital use group. In 18 geographic sectors, rates rose by about 5 percent; the other 100 sectors remained unchanged. The most significant increases occurred in areas like Robinson Road and Orchard. Observers have noted that the hotels are doing well, particularly with tourists in Singapore.

In the average, industrial rates increased by 1.7%. In 42 sectors, the LBC rates increased by 3 to 5 percent. The remaining 76 sectors did not see any changes.

According to a property expert, the Chief valuer probably considered the performance of industrial property markets, where rents and prices rose for the thirteenth consecutive quarter during Q4 2023 as well as the land transactional evidence from September 1, 2023 until February 29, 2024.

LBC rates for places of worship and places used by civic and community institutions remain unchanged. Also left untouched were the rates for other use groups covering open spaces/nature reserves, agriculture and drains/roads/railways.

The Land Betterment Charge Act came into effect on August 1, 2022 and consolidated charges for land enhancement.

The LBC replaced the Development Charge (DC), Temporary Development Levy and Differential Premium regimes. The DC Table of rates was replaced by the LBC Table of rates, which is revised every half year.


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