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Lower charges for non- landed private homes - first time in 5 years - reflect fall in land values

Another sign that the values of land and private homes are sliding arrived yesterday in the form of the new property development charges.

These charges, which reflect changes in land and property values over the last six months, were lowered for residential apartments and condominium units for the first time in five years.

Property consultants were not surprised. They had expected fees in this sector to stay stable or dip slightly, given that the only residential plots sold in the past six months were state-owned parcels that transacted at fairly low prices.

No area was spared, with rates for non-landed residential homes falling across the board by an average of 6 per cent islandwide.

The move was the ‘first signal from official sources that some values in the property market are falling’, said Mr Nicholas Mak, director of research and consultancy at Knight Frank.

The Government levies development charges on developers who want to build a new, bigger development on an existing site they have bought.

The fees are categorised by sector and location. They are revised every six months by the chief valuer, based on transactions of land and property in the past half-year.

Lower charges imply that recent land and property deals have been transacted at lower prices, and also mean that it will be cheaper for developers to buy and redevelop a collective-sale site, for instance.

But property consultants do not expect the new lower charges to revive the deathly quiet collective-sale market.

‘The rise in construction costs is higher than the fall in development charges. So total development cost would still increase,’ said Mr Mak.

Developers may also hold out for further decreases in development charges in the next revision in March, he added.

‘All we need is another quarter of weak sentiment and chances are, six months from now, there could be more downward revision in the charges.’

Mr Li Hiaw Ho, executive director of CB Richard Ellis (CBRE) Research, also expects development charges to fall again in upcoming revisions.

‘In the next 12 to 18 months, development charges might move downwards moderately to reflect a scenario of realistic consolidation after the run-up in land prices in the past two years,’ he said.

This time around, the falls in fees for non-landed residential land ranged from 3.85 per cent to 10.77 per cent, depending on location.

Areas where rates dropped most included prime locations such as Ardmore Park and Sentosa, city fringe districts like Balestier, Keng Lee and Kallang, and suburban regions such as Bayshore and Bishan.

Apart from non-landed residential land, development charges barely budged in other sectors, reflecting the lack of activity and flat prices in the broader property market.

The fees for land to be used for offices, shops, landed homes, hospitals or hotels remained unchanged across all locations in Singapore.

For industrial land, charges rose only in the Ubi and Kaki Bukit area. They went up 11.1 per cent, possibly due to the recent sale of an industrial site in Ubi Avenue 4/Ubi Road 2 in April, suggested CBRE’s Mr Li.

HIGHER TOTAL COST

‘The rise in construction costs is higher than the fall in development charges. So total development cost would still increase.’

Mr Nicholas Mak, director of research and consultancy at Knight Frank, on the lower property development fees

Source : Straits Times - 30 Aug 2008

The Government has lowered redevelopment taxes for non-landed residential properties by an average of 6 per cent, in a move that analysts say reflects the falling value of apartments here. The reduction in so-called development charges will take effect from Monday and last until February 28 next year.

Such charges are levied when a property is redeveloped, for example, after an en bloc sale. The Government adjusts its rates every six months to reflect the value of land.

Mr Li Hiaw Ho, executive director at CBRE Research, said: “This was expected as the pace of acquisition of both public and private land sites has slowed in 2008. The Government has recognised that the prevailing cautious sentiment and news of financial troubles in other global markets have slowed new acquisition of land.”

Property prices have been creeping up since 2006, but have slipped recently on the back of the global credit crunch.

Source : Weekend Today - 30 Aug 2008

The Ministry of National Development, in consultation with the Chief Valuer, has revised the rates of development charges (DC) together with the geographical sector boundaries for the period 1 September 2008 to 28 February 2009.

The Chief Valuer has taken into account the current market values in the half-yearly review of the rates.

Islandwide, the average DC rates for residential (non-landed) use decreased by 6 per cent, industry/warehouse use rates increased by 0.1 per cent, while the change in Business Zone Commercial use rates is negligible.

Boundaries of some geographical sectors have been re-demarcated to better reflect current market values based on existing physical ground conditions.

Source : Channel NewsAsia - 29 Aug 2008

The Lease Buyback Scheme (LBS) to help low-income households monetise their flats for their retirement needs could be implemented as early as January next year.

Senior Minister of State for National Development Grace Fu gave this update in Parliament on Tuesday when replying to a question brought up by MP for Aljunied GRC Cynthia Phua.

Under the scheme, first announced by Prime Minister Lee Hsien Loong in his 2007 National Day Rally speech, the elderly will get a S$5,000 up-front bonus when they sell their remaining flat lease, less the first 30 years, to the Housing and Development Board (HDB).

The remainder of the sale proceeds will be used to buy a CPF LIFE Plan, which provides a lifelong income stream of about S$550 a month for the flat owner.

Some 25,000 low-income elderly households owning 2- and 3-room flats could benefit from the scheme.

Ms Fu also addressed a concern that the elderly have over the scheme.

She said: “A commonly asked question on the LBS concerns the arrangement should the flat owner outlive the 30-year LBS lease. I want to assure Madam Phua that no elderly will be left homeless in that scenario.

“One option is lease extension. However, we do recognise that not all can afford the full price for such extension. HDB will have to assess the housing options available for each case on an individual basis, and be sensitive to the financial health and family circumstances of the elderly concerned.

“On the other hand, if the lease needs to be terminated prematurely because the elderly has passed away, his estate will receive a pro-rated refund on the residual lease.”

Source : Channel NewsAsia - 26 Aug 2008

Developers will now have to include planter boxes, bay windows in GFA

Here’s some bad news for developers: a loophole that helped them sell in excess of the gross floor area (GFA) has been plugged.

Till now, bay windows and planter boxes, which often make up around 5 per cent of a condo’s saleable area, had been exempted from GFA calculations. But in providing them to buyers, developers had been charging buyers for them.

This exemption will no longer apply from Oct 7, according to a circular issued by the Urban Redevelopment Authority (URA) on Monday.

The exemption has led to ‘unintended and undesirable consequences’ and ‘unwittingly shifted market behaviours and negated the objective of the GFA exemptions for these building features’, URA said in explaining why bay windows and planter boxes will no longer be exempted from GFA.

Explaining the impact of the new rules on residential developers, a property industry player said: ‘Developers’ profit margins will be reduced because they will no longer enjoy this benefit of not counting bay windows and planter boxes as part of their GFA and yet selling this space to home buyers. If the developers want to have these features, they will have to pay the full price since these will be included as GFA.’

The new rules apply to all residential developments - landed and non- landed - and are expected to lead to a rush of new development applications, especially from developers who have bought land recently.

URA said bay windows have been ‘found to have contributed significantly to the building bulk, affect the design of buildings and generally do not encourage energy efficiency’. ‘Often the provision of bay windows is intended mainly to increase the saleable strata area,’ it noted.

Planter boxes were introduced to provide ‘vertical greenery’ in condos and create ‘visual relief to our high-density living environment’. However, feedback and URA’s investigations have revealed extensive unauthorised conversions of planter boxes within residential units for use as a balcony space or an extension of the living room instead. The planning authority said it has also received feedback that condo owners are unhappy that they are not allowed to convert planter boxes - which are part of their strata space and which they paid for when they bought their unit - to other uses.

‘URA will leave it to the developers and building owners to decide if they wish to continue to provide bay windows and planter boxes for their residential developments so long as these building features are counted as GFA. The industry will have a free hand to design and provide these building features based on their commercial considerations as there will no longer be restrictions on the size of bay windows and planter boxes,’ URA said.

Planter boxes within non-residential developments (like hotels and business parks), as well as those located within the common areas of residential developments like sky terraces, will continue to be exempted from GFA as these areas are typically well-planted and maintained by the management corporation for the benefit of all occupants in a development.

Only formal development applications (which exclude outline applications) with a valid provisional permission issued before Oct 7 will continue to be evaluated under the old GFA guidelines. For approved developments, bay windows and planters will remain GFA-exempted until the buildings are redeveloped, URA added.

Knight Frank managing director Tan Tiong Cheng had an alternative suggestion for URA. ‘Instead of just removing GFA exemption for bay windows and planters, URA could have let the exemption continue but require developers to specify and identify these features in their sales brochures so that buyers know exactly how much of their strata area is taken up by bay windows and planter boxes. Buyers can then decide whether these features are as attractive to them.’

DTZ executive director Ong Choon Fah observed that bay windows can be a useable area - for sitting, keeping books or displaying photo frames, for instance. ‘Planter boxes, on the other hand, often end up not being used for the purpose they were meant for,’ she added.

Summing up the change, a seasoned industry observer said: ‘This closes one loophole for developers. They’ve had a good run on it.’

Source : Business Times - 10 Jul 2008