The government has lowered the redevelopment tax on non-landed residential property by 15 per cent on average – a more drastic cut than the 6 per cent it made half a year ago.
The biggest reductions affect higher-end properties in prime locations, including Marina Bay, Robertson Quay, River Valley, Orchard Road, Grange/Tanglin, Newton and Holland Road areas.
Some market watchers had been hoping for even deeper reductions, given the weak property market due to the current recession.
But property consultant Chesterton Suntec International said the 15 per cent drop is an accurate reflection of current land valuations.
Chesterton Suntec analyst Colin Tan said regular review of the development charge or DC rate is based on actual transaction values in the previous six months, and not on market sentiment.
He said the cut could help the slumping property market.
“Of course, we are just seeing the beginning of a drop so it will take a lot more, maybe the next DC rate cut, to ensure that it’s profitable now to move forward. Generally, the taxes do not act as an incentive or disincentive, it’s the market. But it lessens the obstacles,” said Mr Tan.
According to CB Richard Ellis, land values are expected to moderate in the course of this year. It said DC rates for non-landed residential use probably fell because of comparatively lower prices for new launches in the residential market in the last six months.
The DC rates for hotel and hospital properties fell by 10 per cent and business zone commercial use properties decreased by 4 per cent.
The development charge is levied when a property is redeveloped into a more valuable project, for example, after an en bloc sale.
The Singapore government adjusts the DC rate every six months to reflect the value of land here. The latest revision will take effect from March 1.
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