DC rates dip the most by 7.8% for Hotel/Hospitality
By Valerie Kor
/ EdgeProp Singapore |
SINGAPORE (EDGEPROP) - On Sept 1, The Ministry of National Development (MND) revised development charge (DC) rates for the six-month period from Sept 1 to Feb 28, 2021. Generally, DC rates have been lowered across various use groups, with the exception of sectors in the residential, landed group.
The development charge is payable when planning permission is given to the development of projects that increase the value of the land, such as rezoning to a higher use or increasing the plot ratio. The rates are reviewed on a half-yearly basis in consultation with the Chief Valuer.
In 1H2020, there were too few capital market transactions for the Chief Valuer to have “the right comparables”, says Desmond Sim, head of research (Southeast Asia) at CBRE. Nonetheless, Sim believes that the weak occupier market in most sectors could have prompted the Chief Valuer to make minor downward tweaks to the DC rates for certain sectors.
Hotel/Hospitality
The largest decrease of 15% in DC rates was seen in sectors with high hotel density, such as City Hall, Fullerton Road, Marina Bay Sands and Orchard Road areas (Photo: Samuel Isaac Chua/The Edge Singapore)
Unsurprisingly, the two main property use groups most affected by the Covid-19 pandemic saw the largest declines, says Tricia Song, head of research for Singapore at Colliers International. Group C (Hotel/Hospitality) saw the largest average decline of 7.8%, followed by Group A (Commercial) which fell by 3.6% on average.
“This is also the largest decline [for Hotel/Hospitality] since March 2009’s –9.6%. Despite a dearth of actual hotel transactions, we deem the decline in DC rates is reflective of the operating conditions for hotels given the sharp declines in global travel and revenues,” says Song.
Additionally, the largest decrease of 15% was seen in sectors with high hotel density, such as City Hall, Fullerton Road, Marina Bay Sands and Orchard Road areas, she adds.
There has been a lack of hospitality deals this year, a stark contrast to 2019, which saw a record level of $5.7 billion of hospitality transactions take place, notes Song.
Commercial
The Chief Valuer has cut DC rates for commercial use by 3.6% on average. Sim observes that it has been the first time in four years since DC rates have been lowered for Group A (Commercial).
Colliers’ Song notes that the largest decrease of 7% applies to sectors which have high concentration of tourists and retail malls, such as Marina Bay Sands, the Bayfront area and Orchard Road.
Tay Huey Ying, head of research and consultancy at JLL Singapore concurs, adding that travel bans had kept foreign visitors away while domestic shoppers have turned to e-commerce or shopping at suburban areas since work-from-home was mandated during the Circuit Breaker period.
On the upside, Leonard Tay, head of research at Knight Frank Singapore says that the fall in DC rates in Group A (Commercial) could have been cushioned by the office sector, which is “more resilient to the initial impact of the pandemic compared to the retail sector”.
Residential (non-landed)
Song says that residential and industrial properties have been relatively more resilient than hotel and retail properties, reflected in the milder declines in DC rates.
DC rates for the residential (non-landed) group have decreased by 0.8% on average, the fourth consecutive time rates have been lowered. Song believes the cuts could be due to relatively muted Government Land Sales bidding, weak collective sales market, and the general slower economic outlook.
"Most government land sales have their tender closing dates extended," adds Song. In March, three GLS sites closed: Canberra Drive site A and B saw five and four bids with top bid prices of $644 and $650 psf ppr respectively, below market expectations. The Executive Condominium site at Fernvale Lane received 7 bids with a top bid of $555 psf ppr.
JLL’s Tay points out that DC rate cuts in the residential use group occur mostly in the RCR locations. “The Chief Valuer could have taken cue from the URA’s non-landed residential property price index (PPI) trend which showed that RCR was the only region that experienced a q-o-q fall in non-landed residential PPI in 2Q2020,” she adds.
In 2Q2020, RCR non-landed residential PPI fell 1.7% q-o-q. In contrast, the non-landed residential PPI rose in CCR and OCR in 2Q20, by 2.7% and 0.1% q-o-q, respectively.
She does not expect the reduced DC rates to re-energise the residential collective sales market, since developers still have substantial unsold inventory built up from the last boom.
Industrial
In terms of the industrial DC rates, it has decreased by 0.9% on average. Song says this is the first decline since March 2017’s –3.7%. “The average decline is relatively mild, reflecting the relative resilience of the industrial property,” she adds.
Industrial uses such as logistics and data centres have been relatively resilient, says Song. However, other segments of industrial use are affected by global supply chain disruption due to the pandemic.
For price trends, recent transactions, other project info, check out these projects' research page: City Hall, Fullerton Road, Marina Bay Sands and Orchard Road
Read also:
Follow Us
Follow our channels to receive property news updates 24/7 round the clock.
EdgeProp Telegram
EdgeProp FacebookSubscribe to our newsletter
Search Articles