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Development charge rates dip across all sectors

Analysts say the downward revision in rates was expected, especially given the softening property market. 

SINGAPORE: Development charge rates have been revised downwards following the regular half-yearly review by the Ministry of National Development.

A development charge is levied on projects that increase the value of the land they sit on. This could involve rezoning of a site to allow higher value use, or when the plot ratio is increased to allow the building of a larger project.

The industrial segment saw the biggest drop in development charge rates, falling by 3 per cent on average. Sector 114, which includes sites such as Boon Lay, Tuas and Lim Chu Kang, saw the largest decrease among sectors, at 16 per cent.

Development charge rates for the other segments also fell. The commercial segment saw rates dropping by 2 per cent on average. Rates for the non-landed residential sector dipped by 1 per cent, while the hotels and hospitality sector saw rates decrease by 2 per cent.

Analysts said the downward revision in rates was expected, especially given the softening property market.

Century21 Singapore's CEO, Ku Swee Yong, said: "Overall, the drop of 2 per cent is consistent with all the rest of the data we have seen, but there are specific pockets where the drop (was larger). Especially for industrial sector 114, which dropped 16 per cent.

"That’s (the) Chief Valuer as well as the authorities taking into account some of the recent land tender prices, some of the feedback from the industry, as well as some of the private transactions that may have taken place which may have been recorded at significantly new low prices.”

Within the residential segment, the largest decrease was 4 per cent for some sites in the west and areas such as Stevens Road, Grange Road and Sentosa. Analysts said this was due to a weakening residential market.

They added that weak occupancy rates was also a factor for the overall downward revision in rates. They said the move suggests that real estate prices could continue to edge down.

"This set of numbers reflects a lot more about the past six months and the data that the Chief Valuer and his team have referenced. We can read that as, looking forward to the next six months - within this time frame of the DC period - he (the Chief Valuer) expects prices to probably drop 2 per cent on average across all these sectors,” said Mr Ku.

Besides the industrial segment, the commercial sector is also expected to face pressure going forward, as the market contends with the record incoming supply of new office stock.