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The government is lowering development charges (DC) on four use groups – commercial, non-landed residential, hotel/hospital and industrial, the Ministry of National Development announced in a press release on Monday (29 February).
DC rates are Government-imposed charges on owners of the land or the person who applied for planning permission, for building bigger developments on a site or enhancing its use. The rates are revised twice a year—on March 1 and September 1—in consultation with the Chief Valuer.
The revision comes “on the back of a softening real estate market, both on the commercial occupier end and a general weakness on the residential front due to the cooling measures,” said Desmond Sim, Head of Research at CBRE Singapore.
DC rates on the four use groups fell whole those for the other five use groups including landed residential, place of worship or civic and community Institution, remained unchanged.
On average, DC rates for commercial decreased by 2 percent after holding steady in the last six months, with 105 out of 118 sectors have a reduction in ranging from 2 percent to 5 percent. The largest decrease of 5 percent applies to areas including Raffles Place, Marina Bay Financial Centre, and Dhoby Ghaut.
Analysts attribute the lowered rate to the softening rental market, particularly in the central business district.
“The decreases in Sectors 1 to 6 and 11 (Raffles Place, City Hall/Marina Centre, Bugis, and Marina Bay) were likely due to the deterioration of the CBD rental market—Grade A rents declined by 10 percent year-on-year as at the fourth quarter of 2015—in the past six months leading to a decline in office capital values,” said Christine Li, Director of Research at Cushman & Wakefield.
Meanwhile, rates for hotel and hospital use also decreased by 2 percent on average, with rate cuts ranging from 2 percent to 3 percent for all sectors except Sectors 116 and 118.
DC rates for industry use have also dropped by 3 percent on average, ranging from 3 percent to 16 percent. The largest decrease of 16 percent in the use group’s DC rate applies to Sector 114, which includes Boon Lay, Jurong West, Tuas and Sungei Kadut. Some sectors saw two consecutive corrections in their DC rates, and according to Sim, this underscores the overall continual weak occupier market.
The latest revisions of DC rates apply for the period March 1 to August 31, 2016.
Going forward, CBRE said any further correction in the revision of DC rates could “encourage owners to intensify use and unlock the potential of the land.”
Nikki De Guzman, Editor at CommercialGuru, wrote this story. To contact her about this or other stories email nikki@propertyguru.com.sg
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