Industrial development charge rates down 3% while others remain unchanged

By Tan Chee Yuen / URA, The Edge Property | September 1, 2015 11:00 AM SGT
Development charge (DC) rates for industrial properties has been trimmed by an average of 3% for the next six months starting September 1, following the latest revision by the Ministry of National Development. The DC rates for the industrial segment have been reduced from 3% to 4% for 87 out of 118 sectors. There is no change to the DC rates for the remaining 31 sectors.
Desmond Sim, Head of CBRE Research, Singapore and South East Asia, said: “The sedated industrial market over the past six months probably led to minor corrections in the DC rates for industrial. This is the first decrease in DC rates for industrial after having remained unchanged for the last three revisions.”
Dr Chua Yang Liang, Head of JLL Research, Singapore and South East Asia, said: “The downward adjustment in the DC rates for industrial has been the largest we have seen since September 2005, when the average decline was at 4.5 per cent.”
“In the recent few years, our industrial production has slowed to some 1 to 2 per cent per annum, according to the Industrial Production Growth Index released by the Department of Statistics. Correspondingly this recent downward adjustment in Industrial DC rates, despite the dearth of industrial land transactions, is an affirmation of the weakening industrial land market dragged down by weaker global demand and internal restructuring“, added Dr Chua.
DC rates for all other use groups including residential, commercial and hospitality remain unchanged. DC is paid by the property owner after approval is granted for development projects that increase the value of the land. The DC rates are reviewed every 6 months based on market values.
Ms Christine Li, Research Director at Cushman and Wakefield, commented: “It is a little surprising that DC rates remain unchanged for all sectors except the industrial sector, given the weakened economic outlook and sentiment in recent months as a result of global market sell-off. However, from a broader perspective, it reflects the stabilisation of the residential market, as supply demand imbalance is being slowly restored through various government cooling measures and total debt servicing ratio (TDSR) framework."