Hotel DC rates largely unchanged for the next six months: URA

This follows a 45.6% hike on the revision last March.

Hotel development charge (DC) rates remain largely unchanged for the next six months following a 45.6% on average hike on the revision last March, according to the September review of DC rates released by the Urban Redevelopment Authority (URA).

Colliers International noted that this may be due to the lack of significant hotel transactions in the last few months, driven by last review’s hike.

Also read: Four largest hospitality REITs average NPI fell 2% in Q2

“Whilst investors are still interested in hospitality assets, the 45.6% hike in DC rates for hotel use since 1 March proved to be too punitive for hotel land deals. Hotel transactions since then have focused on income assets, such as Bay Hotel, Ibis Novena and a stake sale in Marina Mandarin,” remarked Tricia Song, head of research for Singapore at Colliers International.

Additionally, Song noted that hotel statistics have not been too bullish. Tourist arrivals grew just 1.35% YoY to 9.32 million in June whilst hotels’ REVPAR (Revenue Per Available Room) remained flat at $183.9, or a 0.2% YoY decline.

Also read: Hospitality sector's RevPAR to grow 2-3% in 2019

DC rates are reviewed on a half-year basis and are payable when planning permission is granted to carry out development projects that increase the value of the land, for example, rezoning to a higher value use or increasing the plot ratio.

Overall, DC rates were notably reduced for the next six months, which Huttons found “hardly surprising”.

“Sectors where DC rates were reduced saw soft land prices over the six month period from March 2019 to August 2019,” said Sze Teck Lee, director for research at Huttons Asia.

“These reductions are hardly significant to boost the enbloc market unless the land plot is very attractively priced. Developers are likely to hedge their bets in view of the uncertain economic situation,” he added, commenting on Singapore’s commercial, residential, industrial and hotel sites.

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