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The development charge (DC) rates for commercial use rose by 9.8 percent on average – the highest since March 2014 when DC rates for such use rose 14.6 percent.
Desmond Sim, CBRE research head for Singapore and Southeast Asia, noted that Sectors 25 (Selegie Road), 28 (Victoria Street), 29 (Rochor Canal Road), 30 (Jalan Besar) and 93 (Geylang Road) saw the biggest hike in DC rate at 17.4 percent.
“We believe the increase in the commercial use DC rates in these areas are mainly due to the bullish valuations in the shophouse segments in these locations, as well as the rising office and stabilising retail markets in general,” said Tricia Song, Colliers International’s head of research for Singapore.
In fact, data compiled by JLL as at end-February showed that “some $4.73 billion worth of commercial assets (comprising office, retail, shophouses and mixed assets with significant office/retail components) priced $5 million and above apiece were transacted during the DC review period between September 2018 and February 2019”.
The figure is 46.9 percent higher than the $3.22 billion posted during the preceding six months, said Tay Huey Ying, head of research and consultancy at JLL Singapore.
Meanwhile, DC rates for hotel/hospital use rose by a whopping 45.6 percent on average, on the back of strong investment interest and activity in the hospitality market.
“The recent en bloc sales of residential and commercial sites for conversion to hotel use led to the skyrocketing of hotel DC rates. The steepest hike in hospitality sector is very much in line with the recent buying frenzy in the hospitality sector,” said Cushman and Wakefield’s senior director and research head, Christine Li.
Cushman and Wakefield research revealed that hotel investment sales for 2018 hit a four-year high of $1.36 billion, partly due to investors shifting their focus away from the residential sector amidst the property cooling measures implemented in July.
But while the optimism around tourist arrivals, along with the tight hotel supply has emboldened investors to seriously look at hotel assets, Li expects the latest round of DC rates to have some dampening effect on the conversion of hotel use.
Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories, email romesh@propertyguru.com.sg
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