Use Group C (Hotel/Hospital) registered the greatest overall declines in DC rates at 7.8% on average as it is the hardest hit sector by the COVID-19 pandemic.
The Ministry of National Development has decreased the Development Charge (DC) rate for commercial, non-residential, hotel/hospital and industrial use groups for the period from 1 September to 2020 to 28 February 2021, according to a press release on 31 August.
The DC rates are reviewed on a half-yearly basis in consultation with the Chief Valuer at the Inland Revenue Authority of Singapore (IRAS). It is levied based on development projects that increase the value of the land, which includes the rezoning of land use and increasing the plot ratio of the land.
“Under unprecedented times, the first half of 2020 was limited to a few capital markets transactions to arm the Chief Valuer with the right comparables,” said Desmond Sim, Head of Research for Southeast Asia at CBRE.
“Nonetheless, the weak occupier market in most sectors have possibly prompted the Chief Valuer to make minor downward tweaks to the development charge rates for certain sectors.”
Use Group C (Hotel/Hospital) registered the greatest overall declines in DC rates at 7.8% on average as it is the hardest hit sector by the COVID-19 pandemic.
“The hotel/hospitality sector has been badly affected by the various travel restrictions worldwide, such that average hotel occupancy rates registered 48.7% in Q2 2020. The steep fall in average room rate was 64.6% between Q1 2020 and Q2 2020, while RevPAR (revenue-per-available-room) fell by 70.5% in the same period as a result of travel restrictions that came into effect,” said Leonard Tay, Head of Research at Knight Frank Singapore.
“As such, the DC rates for Use Group C (Hotel/Hospital) had 116 sectors in decline with 59 sectors falling by 10% or more against the previous DC Rates six months ago.”
The largest decrease of 15% applies to areas such as Hill Street, Nicoll Highway, Collyer Quay, Shenton Way, Bayfront Area, Cairnhill Road, Scotts Road and Tanglin Road.
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DC rates for use Group A (Commercial) declined by 3.6% on average, with 110 of the 118 sectors posting a DC rate reduction of 3% to 7%.
Sim noted that this is the first time in four years that DC rates have been lowered for Group A.
Tay attributed the decline to the retail sector taking the brunt of the restrictive measures, with shop closures and dine-in F&B disallowed during the circuit breaker.
However, he noted that the fall in DC rates for Group A have been cushioned by the office sector, which he described as “being more resilient to the initial impact of the pandemic compared to the retail sector”.
Meanwhile, the DC rates for use Group B2 (residential, non-landed) decreased by 0.8% on average, the fourth consecutive times rates have been slashed. Notably, 34 of the 118 sectors saw a 2% to 3% reduction in DC rates.
The largest decrease of 3% was registered in areas such as Jalan Besar, Alexandra Raod, Lower Delta Road, Guillemard Road, Aljunied Road and Clementi Road.
Use Group D (Industry) also saw a 0.9% decrease in DC rates, with 52 of the 118 sectors posting a 2% to 3% reduction in rates.
Tay said the slight downward revisions of DC rates for the residential and industrial sectors could be due to the private residential market and the industrial property sector being “more resilient in the past six months, especially with prices from transactional activity in Q2 2020 being fairly stable and not falling in any significant fashion”.
DC rates remain unchanged for landed residential, place of worship/civic and community institution uses as well as other land use groups – open space, nature reserves; agricultural land; drains, roads, railways and cemeteries.
See the full DC rates here, or the Use Group list on MND’s site.
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Victor Kang, Digital Content Specialist at PropertyGuru, edited this story. To contact him about this or other stories, email victorkang@propertyguru.com.sg