Development charge rates reduced for commercial use, increased for residential use

1 Mar 2021

CBRE observes that the continued downward adjustment of 1.5% of DC rates is “not surprising”, given “the lower level of commercial transactions taking place”.

The government has reduced the development charge (DC) rates for the commercial use group by an average of 1.5%, with 60 of the 118 sectors seeing reductions of between 2% and 3%.

Rates for the other 58 sectors remain unchanged.

“Since DC rates were lowered for the first time in September 2020 after four years, the continued downward adjustment of 1.5% was not surprising, given the lower level of commercial transactions taking place,” said CBRE.

With the largest decrease of 3% applied to sectors within the central region, CBRE believes this would “motivate the redevelopment of older buildings in the central area, especially those that qualify for the Strategic Development Incentive and CBD Incentive Scheme”.

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Meanwhile, the DC rates for landed residential use increased by an average of 1.5%, with 44 of the 118 sectors posting increases of between 1% and 6%. Rates for the remaining 74 sectors were unchanged.

Rates for the non-landed residential use group also increased by an average of 0.3%, with eight of the 115 sectors registering increases of between 3% and 6%. Only one sector – Sector 34 witnessed a reduction at 4%.

The biggest increase of 6% applies to Sectors 97 and 98, which CBRE largely attributed “to the sale of the Government Land Sales site at Tanah Merah Kechil Link, where it was awarded after keen bidding”.

The DC rates for hotel use group and industrial use group, on the other hand, remained unchanged.

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Leonard Tay, Head of Research at Knight Frank Singapore, found it surprising that DC rates for hotel use group was not reduced, given that current travel restrictions remain largely in place.

“The hotel/hospitality sector continues to suffer from a lack of tourist arrivals and compromised occupancy rates, despite staycations and quarantine accommodation. Previously the CBD Incentive Scheme encouraged property owners to convert to accommodation uses,” he said.

“However, in the current climate perhaps the government did not decrease DC rates in this use group further so as to discourage new hotel development until economic recovery is certain and some measure of cross border travels are allowed that would signal the promise of international visitors for the hotel sector.”

Moreover, a general lack of hotel sales or transactions for hotel land was observed since the start of the COVID-19 pandemic, added Tay.

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