Average land betterment charge rates raised 7.8% for landed, 0.1% for non-landed housing

/ EdgeProp Singapore |

February 29, 2024 5:00 AM SGT

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The Singapore Land Authority (SLA) raised the average land betterment charge (LBC) rates from Mar 1 to Aug 31, 2024, for all the key use groups comprising landed and non-landed residential, commercial, industrial and hotel/hospital. "The last time this took place was in the September 2011 review," says Tay Huey Ying, head of research and consultancy, JLL Singapore.

The LBC for landed residential property was raised by an average of 7.8% across 116 geographical sectors, with only Jurong Island and Pulau Ubin/Tekong unchanged. Leonard Tay, head of research at Knight Frank Singapore, attributed the increase to the URA price index for landed homes rising 8% for 2023, indicating the "evergreen demand" for such properties.

"Newly developed landed homes by boutique developers, while costly due to elevated material and construction costs, continue to appeal to buyers when weighed against the option of rebuilding aged properties themselves," says Tay.

Tricia Song, CBRE head of research for Singapore and Southeast Asia, says the increase in LBC for landed property is "largely within expectations" given the resilience of the broader market and the Good Class Bungalow (GCB) segment, where average prices have held firm despite a slowdown in sales activity and weak macroeconomic conditions.

In Sector 65, two GCBs along Chee Hoon Avenue were transacted, the larger of which at 46 Chee Hoon Avenue changed hands for $26.70 million or $2,413 psf on land area (Photo: Samuel Isaac Chua/EdgeProp Singapore)

Residential Landed LBC rates (Use Group B1)

The LBC rates for Use Group B1 (Residential, landed) have risen by 7.8% on average, following no changes in Sep 2023. 116 out of 118 sectors saw an increase ranging from 7.5% to 8.4%, with the remaining two sectors seeing no change.

Sector 108 saw two GCBs and 12 other landed properties change hands, notably Hin Leong's founder OK Lim's property at 20 Third Avenue, sold to a Singaporean family for $26.50 mil ($1,818 psf) [Photo: Samuel Isaac Chua/EdgeProp Singapore]

CBRE notes that 13 sectors saw the most significant increase of 8.4%, including Sector 65 (Trevose/ Merryn/ Kheam Hock/ Tudor/ University/ Camden) and Sector 109 (King Albert/ Holland/ Turf Club). Sector 108 (Commonwealth/ Queen Astrid/ Watten) recorded a rate increase of 8.1%. All three sectors saw a healthy number of GCB and landed transactions, says Song.

In Sector 65, two GCBs along Chee Hoon Avenue were transacted, the larger of which at 46 Chee Hoon Avenue changed hands for $26.70 million or $2,413 psf on land area.

Two other GCBs were also transacted in Sector 109: the GCB at 56 Garlick Avenue fetched $19.5 million ($1,885 psf), and 20A King Albert Park was sold for $24.80 million ($1,619 psf).

Sector 108 saw two GCBs and 12 other landed properties change hands, notably Hin Leong's founder OK Lim's property at 20 Third Avenue, sold to a Singaporean family for $26.50 mil ($1,818 psf).

Residential Non-Landed LBC rates (Use Group B2)

The LBC rates for the non-landed residential sector rose by 0.1% on average after a 3.2% decline in September 2023. CBRE's Song noted that the performance across geographical sectors was diverse.

Of the 118 sectors, 37 saw increases ranging from 3% to 14%. Another 27 sectors saw a decrease in rates ranging from 1% to -19%, while the remaining 54 sectors saw no change.

The largest LBC rate cut of -19.2% was for Sector 43 (Cuscaden Road / Tomlinson Road / Tanglin Road). In comparison, the most significant increase of 14% was recorded for Sector 112 (West Coast / Clementi / Faber / Sunset / Jurong East / Toh Tuck / Bukit Batok Industrial).

The biggest increase seen in Sector 112 (West Coast/ Clementi/ Faber/ Sunset/ Jurong East/ Toh Tuck / Bukit Batok Industrial) could be due to the healthy interest at the government land sale (GLS) tender for Clementi Avenue 1, says CBRE. Six bids were received at the close of the tender, and the GLS site was awarded in November 2023 to a joint venture between CSC Land (China Construction (South Pacific) Development Co) and MCL Land for $633.45 mil ($1,250 psf per plot ratio or ppr).

The second largest increase of 10.7% was observed at Sector 103 (Serangoon Central / Potong Pasir / Toa Payoh/ Braddell Road/ Bishan), likely tied to Lorong 1 Toa Payoh GLS site which was awarded to a consortium between City Developments Ltd (CDL), Frasers Property and Sekisui House in November 2023 for $968.00 mil ($1,360 psf ppr), at a unit price above market expectations, CBRE notes.

Other notable sectors that posted increases could be attributed to stable interest in suburban and executive condo (EC) GLS tenders. These include sector 115 (Pierce & Seletar Reservoir/ Mandai/ Marsiling/ Senoko), which saw a 5.3% increase, and sector 113 (Bukit Batok/ Hillview/ Hume/ Cashew/ Bukit Panjang/ Choa Chu Kang), which was 5.2% higher.

In Sector 15, Champion's Way GLS site saw firm interest, receiving six bids and was awarded to CDL for $294.89 mil ($904 psf ppr).

In Sector 113, the EC sites Plantation Close and Plantation Close Parcel B saw strong developer participation. The Plantation Close EC site was awarded to a joint venture between Hoi Hup Realty and Sunway Developments for $348.50 mil ($703 psf ppr) in September 2023 after drawing nine bids. The EC site at Plantation Close Parcel B was also awarded to Hoi Hup Realty and Sunway Developments in February 2024 at a stable pricing of $423.38 mil ($701 psf ppr).

Conversely, sectors where state land received lacklustre interest with bid prices at the lower end of market expectations saw LBC rates decline.

Orchard Boulevard GLS site's muted performance impacted Sectors 42 (Orchard Road/ Orchard Turn / Scotts / Claymore), which saw a -18.8% rate decline and 43 (Cuscaden Road / Tomlinson Road / Tanglin Road), which registered a steeper drop of -19.2% (Photo: Samuel Isaac Chua/EdgeProp Singapore)

Sector 44 (Grange Garden/ One Tree Hill/ Jalan Arnap/ Jalan Kelawar/ Angulia), which saw the GLS site at Orchard Boulevard awarded on Feb 21 to a joint venture between UOL Group and Singapore Land Group, recorded the second steepest decline of -18.8%. The joint bid by UOL-SingLand was $428.28 mil or $1,617 psf ppr, significantly below market expectations, Song points out.

Sector 13 (Marina Gardens Drive/ Marina Grove/ Marina South Drive), where the unawarded Marina Gardens Crescent GLS site is located, saw a moderate decrease in LBC rate of 4.8%. The site received a sole bid of $770.46 mil ($984 psf ppr) from a tie-up between GuocoLand, Hong Leong Holdings and Mitsui Fudosan Co. The site was not awarded as the bid was "too low", according to a URA on Feb 8. The site was moved to the 1H2024 Reserve List of the GLS programme.

"The Chief Valuer probably took into account the earlier Marina Gardens Lane residential site located just across the road, which was awarded on Jul 11 2023, to a Kingsford unit for the top bid price of $1.035 bn or $1,402psf ppr," CBRE's Song reckons.

According to Knight Frank's Tay, developers would likely continue to take a more cautious stance in acquiring private and GLS sites. "As difficult as it has been for residential collective sales to be successful, the increases in LBC rates in 37 sectors in the fringe and suburban areas, ranging from 2.8% to 14%, would now make the en-bloc market even more challenging."

Sector 7 (Cecil/ Robinson/ Shenton/ Boon Tat/ McCallum) also rose 8.3%. This sector saw a collective sale of Shenton House in Nov 2023 for $538.00 mil ($1,889 psf) [Photo: Albert Chua/EdgeProp Singapore]

Commercial LBC rates rise an average of 3.8% (Use Group A)

The LBC rates for the commercial sectors were raised by an average of 3.8%, steeper than the 0.4% upward adjustment in the previous review, notes JLL's Tay. "This is likely underpinned by the returning investors' interest in assets with a substantial commercial component," she says. "Weary of sitting on the sidelines and emboldened by the impending US FED rate hike cuts, investors are returning to the market."

Investors are seen to be picking up pricier commercial assets, with the average deal size increasing to $64 million for the six-month period from Sept 1, 2023, to Feb 29, 2024, from $37 million in the preceding six-month period, according to JLL.

The LBC rates for 104 of the 118 sectors were raised by 2.7% and 9%. The sectors that attracted the top increases in LBC rates are primarily in Orchard and the CBD, likely triggered by the collective sale of Far East Shopping Centre in Sector 42 and Shenton House in Sector 7, notes CBRE.

The highest increase of 9% stemmed from Sectors 41 (Bideford/ Cuppage/ Kramat/ Koek/ Kiliney/ Somerset / Exeter) and 42 (Orchard Road/ Orchard Turn/ Scotts/ Claymore), where 9 Emerald Hill Road transacted for $16 million in December 2023, while Far East Shopping Centre fetched $908 million ($3,350 psf ppr) in September 2023.

Sector 7 (Cecil/ Robinson/ Shenton/ Boon Tat/ McCallum) also rose 8.3%. This sector saw a collective sale of Shenton House in Nov 2023 for $538.00 mil ($1,889 psf).

Sector 42 (Orchard Road/ Orchard Turn/ Scotts/ Claymore) saw 9 Emerald Hill Road transacted for $16 million in December 2023, while Far East Shopping Centre fetched $908 million ($3,350 psf ppr) in September 2023 (Photo: Albert Chua/EdgeProp Singapore)

Hotel LBC rates rise an average of 0.7% (Use Group C)

There were increases in LBC rates in 18 sectors, contributing an overall average gain of 0.7% in the hotel Use Group C.

The affected areas were in the CBD, where Hotel Telegraph in Robinson Road was sold in November 2023, and in Middle Road, where Hotel G was sold in January 2024.

The rise in LBC rates in Orchard Road sectors 39 to 45 could also reflect the steadily increasing number of tourists to Singapore.

Industrial LBC rates up an average of 1.7% (Use Group D)

The Chief Valuer raised the industrial LBC rates by an average of 1.7% in the March 2024 review after holding rates steady in the previous two reviews. Rates for 42 out of the 118 sectors were raised by 2.8% to 5.2%, notes JLL's Tay. She adds that the Chief Valuer would have considered the overall rise in industrial rents and prices for the 13th consecutive quarter in 4Q2023.

Sectors 98 and 103 saw LBC rates rise by 5%. In Sector 98, the 30-year leasehold Tampines North Drive 4 (Plot 1) site achieved a land rate that is 42% above its implied land value based on the LBC rate on Sept 1, 2023.

In Sector 103, the freehold Noel Building (50 Playfair Road) site was sold collectively at a land rate that is 203% above the implied land value from the Sept 1 2023 LBC rate.