See how the latest DC rates revision impacts each sector

From residential, industrial, commercial to hotel.

According to Colliers International, it is unlikely for the latest round of development charge or DC rates revision to have any large impact on the residential collective sales market, at least for the next six months.

How about the other sectors?

Here's the complete analysis from Colliers Director of Research & Advisory, Ms Chia Siew Chuin:

Landed Residential

Surprisingly, the latest revision of DC rates for landed residential (B1) use were adjusted upwards by an average of 6.8%, with increases ranging from 5.3% to 13.2% in as many as 76 of the 118 DC sectors.
The increase exceeds expectations as the DC rates for this use group were already higher by an average of 3.9% in the last round of revision while URA’s property price index for landed homes has increased at a controlled and slower pace by a mere 0.8% in 1H 2013 compared to the 3.0% rise in 2H 2012. The increase is also considered above expectations given the fact that the full potential effects of the Total Debt Service Ratio (TDSR) framework implemented in June 2013, affecting the purchases of all types of properties including commercial properties going forward has yet to be fully established.

Non-Landed Residential

As there was no change in DC rates for non-landed residential (B2) use in the March 2013 revision, the rates are expected to be adjusted upwards under the current review. The current revision of DC rates for this use group saw an average increase of 4.9%, with the majority of 65 sectors left untouched.

From March to August 2013, nine predominant residential sites had been sold, out of which five were from the GLS programme, spreading from the city fringe to suburban areas.

The residential land parcels sold via GLS programme during the review period chalked up prices in excess of the existing implied land value on the March 2013 DC rate list. For instance, the GLS site located on Kim Tian Road (Sector 74) that was sold in April 2013 achieved a land price of $1,163 per sq ft per plot ratio, 117.3% above the imputed land price. This prompted the steepest tune up of the DC rate for the B2 use group by 28.3% for this sector.

In Sector 106 (covering areas such as Seletar and parts of Sengkang), the land price for non-landed housing has also increased during the current review period. The GLS sites located at Sengkang West Way and Fernvale Close were sold at 56.6% and 70.8% above the respective imputed land prices (March 2013). The DC rate for Sector 106 was revised upwards by 14.3%

In Sector 100 (covering areas such as Sengkang and Punggol), the freehold site located at 111 Tampines Road changed hands for $856 per sq ft per plot ratio, 130.3% higher than the current imputed land value. The DC rate was revised upwards by 10.0%.

In the private sector, collective sales activity in the non-landed residential sector accounted for about $474 million in sales. The larger sales above a quantum of $130 million were Ultra Mansion (Sector 60), Yi Mei Garden (Sector 100) and Gilstead Court (Sector 62). In these areas, the DC rates increase by 18.3%, 10.0% and 13.0%, respectively.

Going forward, it is unlikely that the latest round of DC rate revisions will impact the residential collective sales market in any significant manner in the next six months. Currently, the level of activity in the collective sales market is subdued, and therefore the current revision in DC rates is unlikely to make any difference to the collective sales market one way or another.

Industrial

The revision of DC rates in the industrial sector averaged 15.4% increase across all DC sectors is slightly unexpected in light of the moderate gain of 3.8% in the index for industrial prices in 1H 2013, down significantly from the 8.1% climb posted in 2H 2012.

Nonetheless, transaction evidences between March and August 2013 showed the prices of the 12 industrial sites sold by the State, which were 32.4% - 140.7% higher than the land values implied by the prevailing DC rates effective from March 2013.

The largest increase of 29.2% were seen in Sector 115 (covering areas such as Yishun, Woodlands and North Seletar) where an industrial land parcel was sold for $161 per sq ft per plot ratio, which is 140.7% above the current imputed land value.

Also notable is the demand for small, short-tenure sites from end-users in Tuas South. Compared to the land value imputed from the prevailing DC rate for Sector 114 (Tuas, Lim Chu Kang, Choa Chu Kang, Kranji), the land prices of industrial GLS sites sold in the sector during the review period are about 51.7% higher on average. As such, the DC rate for the sector was increased by 18.2% from the DC rates in March 2013.

The DC rate increase of 28.6% in Sector 107 (Thomson, Central Catchment Area) and 28.2% in Sector 104 (parts of Ang Mo Kio, Hougang) are likely to be supported by two industrial land sales in Tagore Industrial Avenue (Sector 107) and Lim Teck Boo Road (Sector 104), where the sale prices were 329.4% and 200.8% above the imputed land values implied from the March 2013 DC rates.

Commercial

The revision of DC rates for commercial use was left untouched for all 118 sectors and this is beyond the market’s expectations. This is despite the various land transactions that took place during the review period and pointing to DC rates trailing behind land prices. For instance, there were three (including the land parcel at Cecil Street/Telok Ayer Street) commercial sites tendered in the GLS programme, and one commercial land sold in the private sector in the last six months.

Additionally, as the government ramps up the development pace for regional centres that have been demarcated for strategic growth, the DC rates in these areas are generally expected to be adjusted upwards. For instance, in Sector 112 (West Coast, Clementi, Pandan Reservoir), the GLS site located on Venture Avenue (Jurong Gateway) was sold for $1,009 per sq ft per plot ratio in March 2013, which is 25.7% above the current imputed land value. Furthermore, the price achieved for the sale of Bright Chambers at 108 Middle Road is estimated to be some 70.3% above the land value imputed from the March 2013 DC rate.

Hotel

There is no change in this round of DC revision for hotel use as there was no sale of hotel site in the previous six months (between March and August 2013). Additionally, the DC rates for hotel use were increased by 26.1% during the March 2013 revision. Nonetheless, as there is now interest in acquiring hotel as a real estate asset for investment, the market has generally expected a moderate increase in the overall DC rates for hotels to the tune of up to 3%.