SINGAPORE (Sept 12): The Singapore government in September raised the development charge (DC) rates for non-landed residential by 18.8% on average due to the euphoria seen in land transactions, according to DBS.

All except two sectors have already increased their rates by 6-29%. In a Tuesday report, analyst Rachel Tan says, “We believe the higher rates might impact en bloc transactions which have not been granted Provisional Permit (PP) before September 1, 2017, thus raising land costs.”

The revised DC rates are expected to bring about a 1% to 4% rise in breakeven prices for recently awarded en bloc sites. Although only a small percentage, Tan says the real impact cannot be disregarded as developers are facing thinning margins amidst the nascent recovery in the property market.

Therefore, larger en bloc sites such as Serangoon Ville and Rio Casa with about 15% breakeven prices premium to the prevailing property prices may launch as early as possible to mitigate potential additional buyer’s stamp duty (ABSD) and qualifying certificate (QC) charges.

“With a potential 9,000 new units already in the pipeline from recent en bloc sites, we believe that the higher DC rates could be potential headwinds to the en bloc momentum, especially for sites with a larger quantum of units,” says Tan.

Aspiring seller might then have to revisit their selling prices to attract developers to continue bidding. “While the status of the en bloc transactions are not confirmed, we understand UOL/UIC are benefitting from being early and the new rates will not be applicable for Raintree Gardens,” says Tan.

This story, written by Samantha Chiew, first appeared on The Edge Singapore.