Rate for land charges show contrast in suburban & prime area

The latest Land Betterment Charge (LBC) rates announced on Thursday, February 29, reflect the polarised sentiment and performance in the private condo market between suburbs versus prime locations.
Property analysis shows that the sharpest cut of 19.2 per cent for LBC rates for non-landed residential use was in the Tanglin/Cuscaden area, followed by chops of 18.8 per cent in the Ardmore/Draycott/Claymore area, Orchard, One Tree Hill, Paterson/Lengkok Angsa and Nassim/Orange Grove/Ladyhill/Fernhill areas.

On the other hand, LBC rates have been raised by 14% in the West Coast/Clementi and by 10% in Braddell/ToaPayoh.

A property researcher in Singapore and South-east Asia stated that the polarised results reflected the contrasting sentiments of suburban and non-suburban locations seen at state land auctions over the last six months.

Particularly, lower than expected bids at the Orchard Boulevard prime site lowered rates for its surroundings. Meanwhile, higher than expected bids in Toa Payoh, Clementi and Toa Payoh sites raised rates for these respective sectors.

Market watchers point out that the divergence of sentiment between suburban and prime locations is due to the fact that in April 2014, the Additional Buyer’s Stamp duty (ABSD), which was imposed on foreign purchasers of private residences in Singapore, doubled from 20% to 60%. In the past, foreigners have dominated Singapore’s prime residential property market.

Read more about the new launch at Tanjong Pagar: One Bernam Condo.

Developers must pay a LBC in order to increase the value of a site or to construct larger projects. The rates will be announced twice a years, on the 1st of March and the 1st of September. They are based on a review conducted by the Singapore Land Authority in consultation with the chief valuer.

The average LBC rate for non-landed residential uses increased by just 0.1 percent in the most recent revision.

LBC rates reflect recent land sales and are based upon the CV’s assessment. These rates are listed according to 118 geographic sectors and 118 use groups in Singapore.

Rates for LBCs in non-landed residential sectors increased by 3-14 percent. Rates were reduced in 27 sectors with decreases ranging between 1% and 19%. SLA reported that rates were unchanged for 54 other sectors.

Analysts don’t expect that the downward revisions to LBC rates in certain geographical sectors will boost the residential collective sales market, because there are many other challenges in the way. Analyst also mentioned the gap between the price of buyers and sellers, the low risk appetite of developers, and the cooling measures for property.

LBC rates for business use have been increased on average by 3.8%. This is probably due to the return of investors’ interest in commercial assets.

The LBC rate for commercial use was increased by between 3 and 9% in 104 of the 118 sectors.

Some property analysts attributed the increase to a handful of large-ticket retail and office property transactions, including Far East Shopping Centre. They believe this could have a negative impact on commercial collective sales.

LBC rates on land for residential use have increased 7.8 per cent in average. Rates rose between 7 to 8 percent in 116 sectors.

The Property Consultancy believes that boutique developers are developing new landed properties at a higher cost due to increased construction and material costs. However, buyers still prefer this option to rebuilding old homes themselves.

LBC rates for hotels and hospitals were increased on average by 0.7%. The rates increased by approximately 5 per cent for 18 geographic areas; however, there was no change in the 100 remaining sectors. The largest increases were found in places such as Robinson Road, Orchard and Orange Grove. Observers report that Singapore tourists are a big part of the hotel business.

The rates for the industrial group were increased on average by 1,7%. This group’s LBC rates have increased between 3 and 5% in 42 sectors. For the remaining 76 sector, there were no changes.

Property expert says Chief valuer likely took into consideration the performance of the industrial property market which has seen rents and price rise for 13 consecutive quarters in Q4 2020, as well land transactional data in the six-month period from Sep 1, 2019 to Feb 29, 2024.

LBC rates are unchanged for places where worship is held or places that are used for civic and communal institutions. Also left untouched were the rates for other use groups covering open spaces/nature reserves, agriculture and drains/roads/railways.

Land Betterment Charge Act – which came into force on 1 August 2022 – consolidates charges for increasing land value.

The LBC regime has replaced the Development Charge, Temporary development Levy, and differential Premium Regimes. The DC Table of Tariffs was correspondingly substituted with the LBC Table of Tariffs. This table continues to be updated on a semi-annual basis.

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