Development fee hikes for home site

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http://www.todayonline.com/Hotnews/EDC100227-0000125/Development-fees-hike-for-home-sites

SINGAPORE - With home prices going north, property developers have had it good in the past year and been going in strong for residential sites released by the Government.

Now, the inevitable has happened: The fees they pay to the Government to enhance or intensify the use of sites will go up from Monday.

Development charges (DCs), which reflect the value of land here, for landed and non-landed homes will increase on average by 12 and 8 per cent respectively, in line with analysts' expectations.

It could lead developers to be more cautious in collective sale bids.

But it should have no major impact on property prices and the market, said analysts.

Sentosa is the big mover in terms of land valuation, largely due to the "integrated resort effect", said analysts.

Its landed residential DC hikes were the sharpest at 17.3 per cent due to recent strong transactions in the area, said Dr Chua Yang Liang, Jones Lang LaSalle's head of research for South-east Asia.

For instance, half of the 13 luxury Kasara villas offered by developer YTL were sold for between $14 million and $22 million this year.

Charges for hotel and hospital development on the island will rise 12 per cent. The sector will also have its rates for commercial developments raised in the half-yearly revision by the National Development Ministry, which otherwise reduced these rates on average elsewhere.

While the level of transactions usually explains a DC increase, property observers noted this was not so for the Hougang, Toa Payoh and Ang Mo Kio areas, which saw a 17-per-cent increase for landed residential.

It could be that the DC there is simply "playing catch-up" to current values, in lieu of a gradual increase over the last few revisions, said one observer.

Overall, the increases are "absorbable" and less dramatic than the hike in July 2007 during the en bloc fever, where the tax for appreciation of land value was increased to 70 per cent from 50 per cent, he said.

For non-landed homes, the largest increase of 15 per cent was seen for the Mountbatten and Katong area, and the eastern areas stretching from Paya Lebar to Tampines.

This is the result of last year's rebound in home sales being "driven by the mass market segment", and developers land-banking in suburban locations through Government Land Sales and the private market, said Mr Ho Eng Joo, executive director of investment sales at Colliers International.

DC rates for commercial use dipped by 2 per cent on average, with the largest drop seen for Raffles Quay and Shenton Way. A cut in rates in the Central Business district will provide a stabilising effect to the commercial property market, even as 2.2 million square feet of office space is completed this year, said Colliers' Mr Ho.