SINGAPORE – Land betterment charge (LBC) rates have increased for commercial, residential and industrial use for the next 6 months from Friday, with the charges for non-landed residential use experiencing the largest rise due to a robust housing market as well as healthy bids for collective sale sites, and government land sales like the Lentoria Site.
Developers pay LBC – which is a replacement of the development charge (DC) – for the rights to enhance the use of sites or to construct larger projects on them.
LBC rates have spiked by an average of 12.9% for non-landed housing use and 10.2% for landed housing use. For commercial usage, the jump is 5.4% on average, while for industrial usage, the rise is 2.3% on average.
Head of research at Cushman & Wakefield, Mr Wong Xian Yang, noticed that the hike in LBC rates for specific segments reflected higher prices in the private commercial, residential and industrial markets in the previous 6 months.
“This indicates strong investor interest in Singapore real estate amid worldwide economic uncertainty, and increasing rents in the residential, commercial and industrial markets,” he commented.
For non-landed residential use, LBC rates have risen by an average of 12.9%, up from a 0.3% increase in the earlier revision in March.
Analysts cited “enthusiastic bids” at certain Government Land Sales (GLS) sites, following healthy take-up numbers at major new launches like at the Lentor Modern site, in spite of higher unit rates and the recent cooling measures.
JLL’s head of research and consultancy in Singapore, Ms Tay Huey Ying, stated that the 12.9% increase – the sharpest since a 22.8% jump in March 2018 – “came as a shock as developers’ bids have been measured in the environment of muted economic growth and soaring interest rates”.
LBC rates for non-landed residential use were increased in 116 geographical regions by between 6% and 20%, with 2 remaining sectors face no change.
The biggest hike of 20% applies to Sector 113, which includes Choa Chu Kang Road, Jurong West Avenue 2 and Upper Bukit Timah Road, as well as the Bukit Panjang and Bukit Batok areas.
Ms Tricia Song, CBRE head of research for South-east Asia, cited the en bloc sales of Park View Mansions at $260 million and Lakeside Apartments at $273.89 million, “as developers consolidated land ahead of the future Jurong Lake District”.
For landed residential use, the jump of 10.2% on average is the steepest in 11 years, and is probably underpinned by the “relentless rise” in landed residential prices, Ms Tay commented.
The landed real estate price index rose 7.3% in first half of 2022, compared with a 6.6% hike in second half 2021, she added.
The LBC rates will be revised two times a year in consultation with the CV.
The Land Betterment Charge Act came into force on Aug 1, 2022 and allows for the consolidation of charges for the enhancement of land value under SLA.
The new LBC regime took over the DC, Differential Premium and Temporary Development Levy regimes.
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