SINGAPORE, 28 February 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 March 2023 to 31 Aug 2023 were released today.
The revisions, or lack thereof, across various use groups, reflect the challenging economic environment facing businesses. Most sectors saw unchanged LBC rates. In particular, high borrowing costs have led to fairly subdued commercial activity since 2H 2022, as transactions would likely result in negative carry (borrowing costs exceed yields).
Apart from the Mercatus transaction, most commercial transactions were bite-sized and fell below $100 million. It is perfectly reasonable that the Chief Valuer would have kept LBC rates for Use Group A (Commercial) unchanged. Given the subdued manufacturing climate, industrialists were offered some reprieve with unchanged LBC rates for industrial land too, after a 2.3% increase in the previous round.
The largest increase in LBC rates was recorded for Use Group C (Hotel/Hospital). The average increase was 1%, and marked the first increase since March 2019. During the pandemic, LBC rates for this group was generally left unchanged, save for a 7.8% downward adjustment in September 2020. With border restrictions and safe-distancing measures fully, or all but fully lifted, the hsopitality industry has been the main beneficiary as pent-up leisure travel demand boosted room and occupancy rates. Business travel will also likely see further recovery with the string of MICE events scheduled in 2023 due to agreements inked between Singapore Tourism Board and global event organisers in October 2022.
The highest increases of 10.2% were recorded in sectors along the prime tourism belt in Tanglin, Orchard, City Hall, Marina Centre, and Marina Bay. Other neighbouring sectors also saw increases of 3.9% to 6.6%. We expect that the Chief Valuer would have also factored in the improved connectivity in areas like Tanglin, Havelock and Downtown, arising from new stations operating along the Thomson East Coast Line (TEL).
Residential LBC rates were raised minimally on the back of a few factors such as the cooling measures of Sep 2022, fairly limited and moderate land bids (GLS or collective sales), revisions to GFA definitions, and the recent BSD increases in Budget 2023. This would be a reprieve for developers looking to acquire land sites to shore up their land bank.
Residential Use Groups B1 (landed) and B2 (non-landed) saw marginal increases of 0.4% and 0.3% on average, respectively, with most sectors within the two Use Groups seeing LBC rates unchanged. Within B1 landed, two sectors (99 and 100) saw increases of 4.3%; these were generally concentrated in the East, and the pace and pricing of landed transactions there probably picked up after PM Lee shed more light on the urban regenerative potential from the relocation of the Paya Lebar Airbase. More housing, recreation and employment opportunities are expected in the future, cementing the government’s decentralisation drive. PM Lee also announced the resumption of development works for Changi Terminal 5 and a future Changi East Urban District, which would have also provided an uplift to land values in the East.
Within the non-landed B1, the largest increase of 4.6% was witnessed in sector 97. The Chief Valuer probably attributed the uplift in land values to the collective sale of Bagnall Court earlier this year, as well as the announcement of more targeted green spaces in the Bayshore precinct, which will improve the liveability of residential spaces. The future 60-hectare Bayshore housing precinct is slated to be ready from mid-2030s, which will have a mix of both private and public housing among its 10,000 homes. Sector 109 saw LBC rates rise by 4.4%, which is likely attributed to the sale of the Bukit Timah Link GLS site, while sector 113 saw a 2.6% increase, again likely due to the sale of the Hillview Rise GLS site. In particular, the Hillview transaction at $1,024 psf ppr was 4.5% higher than Dairy Farm Walk GLS’s price of $980 psf ppr in Mar 2022.
For further information, please contact:
Seah Li Ching (Ms)
DID: +65 6393 2369