Average industrial rates up 16.8%, muted increases for most other uses
THE government yesterday announced modest, lower-than-expected increases in development charge (DC) rates for most use groups, except industrial.
‘Limited transactions in the past six months, amidst cautionary sentiment set about the US sub-prime debacle, were probably an important factor for the moderate gains this round,’ said Jones Lang LaSalle regional director and head of investments Lui Seng Fatt.
Knight Frank director Nicholas Mak said: ‘The government may feel that there has been no significant appreciation in land prices in the last few months.
‘And DC rates for most use groups – such as commercial, non-landed residential and hotel/hospital – were already at a higher base because of substantial hikes in the last revision.
‘Industrial DC rates, on the other hand, had seen only a marginal rise the previous round and hence saw the sharpest increase this time.’
DC rates, which are payable for enhancing the use of some sites or putting bigger developments on them, are revised twice yearly, on March 1 and Sept 1, and are listed according to use groups and 118 locations across Singapore.
From today, the average DC rate for commercial use has gone up 1.5 per cent – after the 42 per cent increase in the last round on Sept 1, 2007. The average rate for non-landed residential use has been raised 2.6 per cent, again much smaller than the 58 per cent hike previously, while the average rate for landed residential use has been left unchanged.
For hotel and hospital use, the latest DC rates are up 3.3 per cent on average, compared with a 23 per cent hike previously.
Industrial DC rates have jumped 16.8 per cent on average, against a 2 per cent rise previously.
JLL’s Mr Lui said that the big hike in industrial DC rates is in tandem with growing demand for backoffice space as more firms relocate out of the CBD due to high rents.
For industrial DC rates, the biggest hike of 33.3 per cent was in the Jurong/Lim Chu Kang/Kranji location, which analysts attributed to JTC Corp’s sale of two industrial sites at Jalan Tepong and Pioneer Road/Tuas Avenue 11 at about double the land values implied by the previous September 2007 industrial DC rate for the area.
Similarly, the sale of an industrial plot at Commonwealth Drive/Lane at about four times the September 2007 DC rate-implied land value was probably behind a 32 per cent hike yesterday in the industrial DC rate for the area.
Industrial DC rates were raised by 22.2 per cent each in the Kallang Way /MacPherson /Aljunied, and Braddell/ Potong Pasir/ Woodleigh areas, based on JLL’s analysis. The rate for West Coast Road/ Jurong East was upped 20.7 per cent.
Increases of 20 per cent were seen in locations such as Havelock Road, Telok Blangah, Tiong Bahru, Bukit Merah, Redhill, Alexandra and Henderson.
Commercial DC rates stayed put in Raffles Place, Marina Bay, Cecil Street and Robinson Road. Instead, the hikes were mostly outside the central business district, ‘reflecting the trend of office demand being pushed out of the CBD’, Savills Singapore director Ku Swee Yong said.
The biggest increases, of 25 and 23.3 per cent, were in the Toa Payoh/Potong Pasir and Paya Lebar/Eunos areas respectively.
The sale price of a 99-year commercial plot next to the HDB Hub in Toa Payoh in October and rising rents at SingPost Centre in Paya Lebar were likely reasons for the increases.
The Marine Parade and Tampines locations each saw a 19 per cent appreciation in commercial DC rates, apparently supported by the sale price of an office unit at Parkway Parade, and rental evidence at Tampines Mall and buildings in the Tampines Finance Park.
For non-landed residential DC rates, the biggest gain of 28.6 per cent was in Ang Mo Kio/Yio Chu Kang as well as an adjoining sector that covers Upper Thomson and Sembawang Hills. Far East Organization’s $601 psf per plot ratio top bid for a condo site next to Ang Mo Kio Hub in September last year – a record for 99-year suburban condo land – was the likely reason for the rate hikes.
The Telok Blangah and Tiong Bahru/Ayer Rajah locations each saw hikes of 22.2 per cent in non-landed residential DC rate.
CB Richard Ellis executive director Li Hiaw Ho said that the increases were probably supported by the $639 psf ppr fetched for a 99-year condo site on Alexandra Road last year. Mr Li also pointed to the sale of a freehold site on Margate Road as the likely reason for a 21.4 per cent rate hike in the Mountbatten/Meyer/Broadrick area.
For hotel use, gains of around 9-10 per cent were seen in DC rates for the traditional hotel belts in the Orchard Road, Marina Centre and Singapore River locations, as well as places like Marina Bay, Bayfront and Fullerton Road.
‘The tourism boom is expected to continue as the Singapore government drives towards the 17 million visitors goal by 2015.
Orchard Road remains Singapore’s main shopping belt, while upcoming developments in the Marina area such as the Marina Bay Sands integrated resort and the F1 race will further generate demand for hotels in the area,’ Mr Lui said.
The DC use group for hotels also includes hospitals and interestingly, the government did not raise the DC rate for the Irrawaddy Road location where a hospital site last month fetched a record price of $1,600 psf ppr from Parkway group.
A spokeswoman for the Chief Valuer said: ‘Parkway’s record bid was an isolated case. In general, there’s no compelling evidence that market values for hotel/hospital use in the area have moved up so much.’
Source: Business Times 1 Mar 08