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Property development charges barely budge

Small revision of fees points to dwindling deals, slow price growth

IT’S official: the property market has gone deathly quiet.

The Government barely tweaked development charges in its semi-annual revision of fees yesterday, reflecting the property sector’s subdued state over the last six months.

Development charges, which can run in the millions of dollars, are what a developer has to pay to buy and redevelop an existing site.

Average islandwide charges for office, hospital, hotel and non-landed housing sites merely inched up, while landed residential sites saw no change in the fee at all.

This marks a big reversal from last year, when the frantic pace of land acquisition led to record hikes in development charges for many sectors.

In super-hot locations, the fees were even doubled.

This time, the only major change was in the industrial sector, where charges jumped 16.8 per cent – compared to 2 per cent in the last round.

This was due to a previous low base, as well as rising demand for back-office space, which led to recent land sales at benchmark prices in areas such as Commonwealth and Ubi, said experts.

Development charges are set by the chief valuer based on recent land and property values, and are adjusted every six months, so their growth rate can be used to indicate market activity.

Property watchers said yesterday’s small rises show what the market has known for some time: Property deals are dwindling and the pace of price growth has slowed.

‘The rates have been moderated as a result of the limited transactions over the last six months, attributed in part to the more cautionary sentiment,’ said Mr Lui Seng Fatt, the regional director and head of investments at Jones Lang LaSalle.

But fees rose for areas on the city fringe, showing that activity is spilling out from prime spots, said Savills Singapore’s Mr Ku Swee Yong.

Development charges rose for non-landed residential sites in Upper Thomson, Tiong Bahru, Balestier and Chancery, among others.

This was probably due to some collective sales late last year, said Mr Nicholas Mak of Knight Frank.

These include the sale of Toho Gardens in Yio Chu Kang and 15 terrace houses in Balestier.

Mr Mak said the fee rises in these areas could further affect the already cautious sentiment in the market.

The overall impact, however, is ‘not as major’ as that from the last round of hikes in charges, he added.

Still, developers looking for new land will probably start relying more on government sales – which do not involve development charges – than on collective sales, said Mr Li Hiaw Ho, the executive director of CB Richard Ellis Research.

In the office and shops sector, the recent sales of transitional office land helped boost development charges in Tampines and Scotts Road.

Thomson and Paya Lebar also saw bigger hikes than the rest.

Hotel sites had increases mainly in central areas, while the fees for industrial sites rose across the board.

Source: The Straits Times 1 Mar 08

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