SINGAPORE, 31 August 2023 – Mr Lam Chern Woon (蓝振文), Head of Research and Consulting at EDMUND TIE comments on SLA’s announcement on Land Betterment Charges Revision.
The land betterment charges (LBC) for the period 1 September 2023 to 29 February 2024 were released today.
Despite ongoing challenges, real estate sentiment has improved in general. The government has opted to apply a light touch on the LBC rates in general, keeping them unchanged across most use groups. Two use groups, A (Commercial) and C (Hotel/Hospital) saw average increases of 0.4% and 3% in LBC rates respectively, while the non-landed residential use group (B2) saw an average decline of 3%.
For use group A (Commercial), most sectors saw unchanged LBC rates, with the exception of 12 sectors (3% to 4% increase). Ten geographic sectors saw an increase of 4% and many include localities with a concentration of shophouses. Recent transactions that may have supported the increase in LBC rates for this group include the Liberty House office transaction (Sector 16), as well as shophouse transactions in Stanley Street, Duxton Hill and Amoy Street (Sector 16), New Bridge Road (Sector 21), Jalan Besar (Sector 53) and Geylang Road (Sector 102). The increases in LBC rates for the selected sectors are reflective of the commercial activity, especially in shophouses. The run-up in the capital values of shophouses, coupled with the spillover of investor interest into this segment post-ABSD rate hikes for the residential sector, have likely prompted the Chief Valuer to act accordingly with higher land levies.
For use group C (Hotel/Hospital), the uplift in the hospitality sector has led to all but two geographic sectors meted with higher LBC rate ranging from 3% to 5%. The average increase of 3% is also a marked increase from the increase of 1% in the previous revision. With China’s reopening and the resumption of more international flights, the hospitality industry has been experiencing a steady recovery from the pent-up leisure travel segment, boosting room occupancies and rates. The potential is also strong for a continued rebound in business travel, driven by a series of MICE events planned for the latter part of 2023 and in 2024. The sectors that saw the largest increase of 5% relate to localities along Tanglin/Orchard, City Hall, Bugis, Collyer Quay, Bayfront and Sentosa. While a rising tide lifts all boats, the luxury and upscale hotel segment has been the prime beneficiary of the tourism upswing. Even as the visitor flow from Mainland China has fallen short of expectations, those who have ventured out of China are likely the affluent who favour brand hotels in choice locations.
The use group B2 (Residential, non-landed) saw LBC rates declining by 3% on average. 94% or 111 sectors saw LBC rate declines ranging from 3% to 11%. The declines are within expectations, as market sentiment has taken a hit with the cooling measures in April, a tight financing climate and the recent inclusion of land zoned Commercial and Residential under the Residential Property Act. We are cautiously optimistic the reduction in LBC rates could provide a shot in the arm for the collective sale market, which has seen only one transaction (Kew Lodge) since the April cooling measures. Four sectors saw the greatest decrease in LBC rates of 11% and they are located in the Straits View, Bayfront and Marina South localities. The Chief Valuer likely took a cue from the fact that the difference between the Marina Gardens Lane GLS site top bid ($1,402 psf ppr) this year, and the Marina View GLS site top bid ($1,379 psf ppr) in 2021, was less than 2% despite property prices trending north over the last two years. The low number of bids (four bidders) and the wide bid spread of 42% for the Marina Gardens Lane GLS site tender also reflected considerable caution among developers. Last but not least, while reception towards downtown living is gradually warming up, most families with young school going children would prefer other prime districts. With a higher prevalence of a rental community and investor owners for downtown residential homes, investor sentiment is likely to be significantly moderated with the hikes in ABSD rates in April.
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