This could offer hope to some private residential projects that are attempting collective sales, analysts say. PHOTO: ST FILE
SINGAPORE – Developers may finally be getting some reprieve with landbanking costs as land betterment charge (LBC) rates for residential use have been raised at a much slower pace for the next six months from Wednesday.
This could offer hope to some private residential projects that are attempting collective sales, analysts say.
Developers pay an LBC – which replaced the development charge (DC) – for the right to enhance the use of some sites or to build bigger projects on them.
The hotel sector saw the biggest increase in LBC rates as the hospitality industry has benefited from pent-up leisure and business travel demand boosting room and occupancy rates.
However, LBC rates are unchanged for most other use groups, including industrial and commercial ones, given the weaker manufacturing environment and high borrowing costs, which have dampened commercial investment sales, said Mr Wong Xian Yang, head of research at Cushman & Wakefield.
For the residential sector, the moderate increase in LBC should offer some relief for developers whose landbanking has been dampened by two rounds of cooling measures and a recent hike in buyer’s stamp duties for pricier residential and non-residential properties.
Despite record low levels of unsold inventory, land acquisition activities have been muted as development risks rose with higher construction costs and interest rates, and sales slowed amid an uncertain economic outlook.
The Government applied a “soft touch” to this current review, said Ms Tay Huey Ying, head of research and consultancy at JLL Singapore.
LBC rates have been raised by an average of 0.3 per cent for non-landed residential use, down from a 12.9 per cent increase in the previous revision in September. This is in line with a slower land sales market and developers’ measured bids during the previous review period, Ms Tay said.
For landed residential use, LBC rates have been raised by an average of 0.4 per cent, down from a 10.2 per cent rise in the previous revision, as the price growth for landed homes has stabilised amid slowing sales.
But CBRE’s head of research for South-east Asia Tricia Song believes “the flattish LBC rates may not boost en bloc activities much”, in the light of the recent increase in marginal buyer’s stamp duty.
ERA Realty head of research and consultancy Nicholas Mak disagreed, pointing out that the average increase in LBC rates is relatively small and “affects only a minority of the 118 sectors” for residential developments.
“The new revision of LBC should be welcomed by both developers and sellers of en bloc sale properties,” he said.
The largest increase in LBC of 5 per cent came from the area bound by Bedok South Avenue 1, New Upper Changi Road, Bedok Road and Upper East Coast Road, possibly due to the collective sale of Bagnall Court in January, said Knight Frank’s head of capital markets for land and collective sales, Ms Chia Mein Mein.
The eastern part of Singapore should remain an attractive prospect for en bloc sales, she added, as estates such as Upper East Coast Road, Siglap Road, Bayshore, Bedok, Loyang and Changi saw only slight increases of 2.2 per cent to 3 per cent in LBC
Some potential collective sale projects in this area include Mandarin Gardens and Laguna Park, Ms Chia said.
For the hotel/hospital sector, the rise of 1 per cent in LBC rates marks the first increase since March 2019. During the pandemic, LBC rates for this group were left unchanged, except for a 7.8 per cent downward adjustment in September 2020, said Mr Lam Chern Woon, head of research and consulting at Edmund Tie.
But with borders reopening, the hospitality industry should continue to benefit from a recovery in leisure and business travel, given more Mice (meetings, incentives, conventions and exhibitions) events scheduled this year, Mr Lam said.
He noted that the “highest increases of 10.2 per cent were recorded in sectors along the prime tourism belt in Tanglin, Orchard, City Hall, Marina Centre and Marina Bay. Other neighbouring sectors saw increases of 3.9 per cent to 6.6 per cent”.
The improved connectivity in areas like Tanglin and Havelock following the opening of new stations along the Thomson-East Coast Line would have been factored into the current review, he added.
“Source:[Marginal rise in land betterment charges may boost appeal of some en bloc sites] © Singapore Press Holdings Limited. Permission required for reproduction
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