Hefty rise in development charges for business areas

THE rush to buy homes in the Marina Bay area late last year has contributed to hefty increases in a charge payable to the Government by developers when they want to enhance a property site.

The downtown area also recorded hefty jumps in the charge for the commercial and hotel sectors.

The Government yesterday raised the development charge, as it is known, for non-landed residential use in the downtown areas of Marina Bay, Shenton Way and Robinson Road by up to 55 per cent.

While high, this was not a total surprise, given that new projects like Marina Bay Residences, One Shenton and Lumiere were sold at $1,600 per sq ft (psf) to $3,450 psf, late last year, well above the previous launch price of $1,200 psf for tower two of The Sail @ Marina Bay in late 2005, consultants said.

Development charges, which are revised twice a year on March 1 and Sept 1, closely mirror property values. They vary according to land use and 118 locations.

The charges can range from hundreds of thousands of dollars to tens of million of dollars for large projects.

The National Development Ministry, in consultation with the chief valuer, yesterday raised the charge for non-landed residential use by 14 per cent on average, compared to a 9 per cent rise six months ago.

The charge for landed residential use rose by 6 per cent on average, from 1 per cent previously, while the charge for commercial use increased by an average of 12 per cent, from 2 per cent.

However, the biggest jump was in the hotel and hospital segment, where rates rose by 27 per cent on average, compared with no change six months ago.

The rates for other uses such as industrial use remain unchanged.

In the residential sector, Sentosa posted significant increases in the charge for landed use (28 per cent) and non-landed use (nearly 28 per cent) as the values of Sentosa Cove properties have risen considerably.

In the Orchard Road area, collective sales have led to a 16 to 21 per cent rise, though the hike is lower than the 32 to 38 per cent rise previously, said Mr Li Hiaw Ho, executive director of CBRE Research.

The hikes for non-landed residential use would affect the collective sale market to a certain extent as developers would have to price in higher charges, consultants said.

'But the increases would not derail the collective sale trend because the major shocks in development charge increases already happened in the past few revisions,' said Mr Lui Seng Fatt of property consultancy Jones Lang LaSalle.

However, some developers may raise the selling prices of existing and future developments as the increase in development charges have jacked up their replacement costs, said a property expert.

In the commercial sector, the charge for the Battery Road/Chulia Road/Collyer Quay area showed the biggest rise of 44.4 per cent, probably boosted by the keen competition and bullish bids seen for the Collyer Quay site, said Mr Li.

The Marina Bay area locked in a 31.6 per cent rise in the charge, giving the area an implied land value of $465 psf per plot ratio (ppr), he said.

However, the consortium developing the Marina Bay Financial Centre secured savings for phase two of the project by locking in its rate at $423 psf ppr in the middle of last month, said Mr Li.

In the hotel segment, the increases in the charges were dramatic - at up to 90.5 per cent in the downtown areas, reflecting the record bid for the Collyer Quay site, he said. Interest in hotel sites has been strong in the past six months, with four hotel sites awarded, up from one in 2005 and none in 2004, he added.

The Government had released several hotel sites for sale to cater to an expected rise in tourism.

Mr Lui said the hefty increases in the hotel charge had been expected. 'It has been almost 20 years since we have seen so many hotel sites made available.'

joyceteo@sph.com.sg