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Higher development charges for residential and commercial properties

Higher development charges for residential and commercial properties

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SINGAPORE — From today, developers of residential and commercial real estate will have to pay higher development charges, with the biggest increase seen in residential non-landed property. Analysts noted that this could temporarily cool the en-bloc sale fever.

Last month, Tampines Court — a former Housing and Urban Development Company estate — was sold for S$970 million in the largest collective sale in a decade. Upcoming 
executive condo  launches include Anchorvale Lane EC, Rivercove Residences  while existing ones include Parc Life , Signature at Yishun,  Brownstone EC, Visionaire EC, Inz Residence, The Criterion EC and Northwave EC, The Terrace EC,  The Vales EC, Hundred Palms Residences EC, Sol Acres EC and The Bellewoods EC. Rivercove Residences floor plans and Rivercove Residences EC details will be available shortly.

The development charge is a tax levied on developers when planning permission is granted to carry out development projects that increase the value of land, including rezoning to a higher value use and increasing the plot ratio of the property.
The rates are reviewed every six months, in consultation with the Chief Valuer at the Inland Revenue Authority of Singapore.

The development charge rates for residential non-landed property have increased by 13.8 per cent on average.

Some 116 out of 118 sectors saw increases in development charges, ranging from 6 per cent to 29 per cent. The largest increase of 29 per cent applies to the Tampines Road/Hougang/Punggol/Sengkang area.

With bullish land prices paid by developers in the last six months, analysts were not surprised with the rise in development charges.

“This was the highest average increase since September 2007 when the average increase was a massive 57.8 per cent,” said Mr Nicholas Mak, executive director, ZACD group.

“The latest round of increase in the development charges for non-landed residential properties could temporary cool the en-bloc sale fever. Depending on the location, the increase in development charges could have a greater impact on the en-bloc sale of 99-year leasehold projects as it could increase the charges payable for increasing the floor area of the new development as well as topping up the 99-year lease of the land.”

Recent en-bloc transactions, such as the sale of Rio Casa for S$575 million, and the strong launch of Park Place Residences, which sold all 215 of its Phase 1 units for an average price of S$1,900 per square foot (psf), are likely to have prompted the upward revision in development charges, said Ms Christine Li, director of research at Cushman & Wakefield.

In the first half of the year, the total commercial and residential transactions recorded S$6.9 billion and S$6.2 billion, reflecting a 23 per cent and 130 per cent increase respectively, she noted.

“Developers paid an average of 29 per cent premium over comparable sites for the first five months of the year, a marked increase when premiums were sub-zero in late 2015 and early last year. The increasingly bullish bids by developers in recent land tenders is a testament that home prices are likely to increase when these projects reach the market,” added Ms Li.

The latest round of rates revision are not expected to have a significant impact on the landed property market as the development charge rates for this group increased by just 0.3 per cent on average and only five out 118 sectors are affected by the changes, said Mr Mak.

The development charge rates remain unchanged for all other classes of real estate, including land designated for hotel and hospital development, industry, places of worship and civic and community institutions.
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