Development charges DC for condo sites cut again

IN A tough market, some modestly good news emerged for developers yesterday as development charges (DCs) for condo and other non-landed sites fell again.

Developers pay DCs to the Government for enhancing the use of a site or building a bigger project.

The Ministry of National Development said it has cut DC rates for non-landed residential use by an average of 3.2 per cent, the second straight cut - in line with property price moderation.

The new rates, which take effect tomorrow, were released yesterday. DCs are reviewed every six months and revised based on current market values.

They were trimmed for non-landed residential use by 1.6 per cent six months ago. Before that, they were cut in March 2012.

This time, 73 of 118 sectors registered falls in DC rates for non-landed residential use. The other 45 sectors stayed flat.

The largest drop of 12.5 per cent was for sector 100 - the Tampines Road, Hougang, Punggol and Sengkang area. Sim Lian Land's top bid for the Anchorvale Crescent executive condominium (EC) site earlier this month - $157.8 million, or about $280 per sq ft per plot ratio (psf ppr) - could have sped the decline, as it was the lowest tabled for an EC site since July 2011, said Ms Chia Siew Chuin, Colliers International director of research and advisory.

Hao Yuan Investment's successful bid later in the month for a Woodlands Avenue 12 EC site - which at $103.8 million, or about $278 psf ppr, was even lower - could also have led the DC rate for non-landed residential use in Woodlands to be cut by 5.1 per cent.

Apart from these two areas, DC rate declines were generally located in the central region, on the back of the weak home-buying sentiment and demand for high-end homes, said Ms Chia.

DC rates for sectors 37 and 38 in the prime residential districts of 9, 10 and 11 - covering Clemenceau Avenue, Scotts Road, Winstedt Road, Bukit Timah Road, Sarkies Road and Balmoral Road - fell 7.1 per cent while that for Orchard Road fell 5.9 per cent.

DC rates were unchanged for landed residential use, hotels and hospitals, industrial use, and places of worship and civic and community institutions.

But they were raised by an average of 2 per cent for commercial use, the third straight increase after going up by an average of 2.1 per cent half a year back. Ms Christine Li, Cushman & Wakefield director of research, said this was supported by the robust commercial investment market.

Among the sectors seeing the largest increase of 9.1 per cent were 8 and 10, including Maxwell Road, Telok Ayer Street, Hoe Chiang Road and Keppel Road.

This may have been caused by sales of strata units on the 18th, 19th and 21st floors of Samsung Hub at $3,175 psf to $3,280 psf in the fourth quarter of last year, exceeding the $3,030 psf paid for the 14th floor in April, said Ms Li.

Half of the 11th floor at Prudential Tower was transacted at $2,750 psf, a rise from the $2,316 psf achieved in the building's collective sale in the second quarter.

Dr Chua Yang Liang, JLL head of research for South-east Asia, said most of the large rises were in sectors with some shophouses.

"This type of real estate has caught the attention of investors and prices have been on an upward trend of late. This is possibly one factor that has motivated the significant increase in commercial rates in these sectors."

The divergent trend between the residential and commercial markets is likely to continue, but should diminish as the large office supply comes in, he added.

Source: SRX

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Development charges DC for condo sites cut again

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