Land betterment charge rates raised for all key use groups

SINGAPORE, February 29, 2024 –

Ms. Tay Huey Ying, Head of Research and Consultancy, JLL Singapore
郑惠匀, 研究与咨询部主管 (新加坡) commented:

The Singapore Land Authority (SLA) raised the average Land Betterment Charge (LBC) rates applicable for the period 1 March to 31 August 2024 for all the key use groups comprising Landed and Non-landed Residential, Commercial, Industrial and Hotel/ Hospital. The last time this took place was in the March 2014 review.

The LBC rates for the landed residential use groups have been raised by a steep average of 7.8% after being left untouched in the previous review period. This has come as a surprise given landed homes have recorded muted price growth of just 0.9% in 2H23 after rising 7.0% in 1H23, based on URA’s landed home price index. The market cooling measures had weighed down buying demand and softened price growth for landed homes. Based on caveats lodged, the transaction volume for landed homes totalled just 750 units in 2H23.

The increase in LBC rates is likely to be a catch up to the 7.0% price appreciation for landed homes in 1H23.

The LBC rates for the Commercial Use Group were raised by an average of 3.8%, steeper than the 0.4% upward adjustment in the previous review. This is likely underpinned by the returning investors’ interest in assets with substantial commercial component.

Weary of sitting on the sidelines and emboldened by the impending US FED rate hike cuts, investors are returning to the market. They are drawn to assets with substantial commercial component by the sound demand and supply fundamentals supporting healthy future rental income stream and/or capital/development gains.

With confidence on the rise, investors are seen picking up pricier assets with substantial commercial component as evidenced by the surge in average deal size to SGD 64 million in the current six-month review period between 1 September 2023 and 29 February 2024, from SGD 37 million in the preceding six-month period.

The LBC rates for 104 out of the 118 sectors were raised by between 2.7 and 9.0%. The sectors that attracted the top increases in LBC rates are largely in Orchard and the CBD and these were likely triggered by the collective sale of Far East Shopping Centre in Sector 42 and Shenton House in Sector 7.

The Chief Valuer raised the industrial LBC rates by an average of 1.7% in the March 2024 review, after holding rates steady in the previous two reviews. Rates for 42 out of the 118 sectors were raised by 2.8% to 5.2%.

Chief Valuer likely considered the performance of the overall industrial property market which saw rents and prices rising for the 13^th consecutive quarter in 4Q23, as well as land transactional evidences in the six months from 1 September 2023 to 29 February 2024.

For example, the 5.0% upward adjustment in rates for Sectors 98 and 103 likely took into account the following deals:

• In Sector 98, the 30-year leasehold Tampines North Drive 4 (Plot 1) site achieved a land rate that is 42% above its implied land value based on the 1 September 2023 LBC rate.
   

• In Sector 103, the freehold Noel Building (50 Playfair Road) site was sold collectively at a land rate that is 203% above the implied land value from the 1 September 2023 LBC rate.

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Source: URA