Dip in property development fees

Source : Straits Times - 30 Aug 2008

Lower charges for non- landed private homes - first time in 5 years - reflect fall in land values

ANOTHER sign that the values of land and private homes are sliding arrived yesterday in the form of the new property development charges.

These charges, which reflect changes in land and property values over the last six months, were lowered for residential apartments and condominium units for the first time in five years.

Aside from prime locations, city fringe areas similar to this one off Newton Road are always development rates have dropped the most. — ST FILE PHOTO

Property consultants were not surprised. They had expected fees in this sector to stay stable or dip slightly, given that the only residential plots sold in the past six months were state-owned parcels that transacted at fairly low prices.

No area was spared, with rates for non-landed residential homes falling across the board by an average of 6 per cent islandwide.

The move was the ‘first signal from official sources that some values in the property market are falling’, said Mr Nicholas Mak, director of research and consultancy at Knight Frank.

The Government levies development charges on developers who want to build a new, bigger development on an existing site they have bought.

The fees are categorised by sector and location. They are revised every six months by the chief valuer, based on transactions of land and property in the past half-year.

Lower charges imply that recent land and property deals have been transacted at lower prices, and also mean that it will be cheaper for developers to buy and redevelop a collective-sale site, for instance.

But property consultants do not expect the new lower charges to revive the deathly quiet collective-sale market.

‘The rise in construction costs is higher than the fall in development charges. So total development cost would still increase,’ said Mr Mak.

Developers may also hold out for further decreases in development charges in the next revision in March, he added.

‘All we need is another quarter of weak sentiment and chances are, six months from now, there could be more downward revision in the charges.’

Mr Li Hiaw Ho, executive director of CB Richard Ellis (CBRE) Research, also expects development charges to fall again in upcoming revisions.

‘In the next 12 to 18 months, development charges might move downwards moderately to reflect a scenario of realistic consolidation after the run-up in land prices in the past two years,’ he said.

This time around, the falls in fees for non-landed residential land ranged from 3.85 per cent to 10.77 per cent, depending on location.

Areas where rates dropped most included prime locations such as Ardmore Park and Sentosa, city fringe districts like Balestier, Keng Lee and Kallang, and suburban regions such as Bayshore and Bishan.

Apart from non-landed residential land, development charges barely budged in other sectors, reflecting the lack of activity and flat prices in the broader property market.

The fees for land to be used for offices, shops, landed homes, hospitals or hotels remained unchanged across all locations in Singapore.

For industrial land, charges rose only in the Ubi and Kaki Bukit area. They went up 11.1 per cent, possibly due to the recent sale of an industrial site in Ubi Avenue 4/Ubi Road 2 in April, suggested CBRE’s Mr Li.

HIGHER TOTAL COST

‘The rise in construction costs is higher than the fall in development charges. So total development cost would still increase.’- Mr Nicholas Mak, director of research and consultancy at Knight Frank, on the lower property development fees