Higher land values recorded from recent collective sales and more optimistic bids in state land tenders in the fourth quarter of 2024 boosted land betterment charge (LBC) rates for non-landed residential use. These rates will rise for the next half year after a drop in the previous period, while those for landed residential will grow at a faster pace.

Developers pay an LBC for the right to enhance the use of some sites or to build bigger projects on them.

The latest LBC rates for the March 1 to Aug 31 period were announced on Feb 28, following a review by the Singapore Land Authority in consultation with the taxman’s chief valuer.

The LBC rates are based on the chief valuer’s assessment of land values and take into consideration recent land sales. For non-landed residential use, LBC rates will rise by 0.3 per cent on average after dropping an average of 5.4 per cent in the previous revision period from Sept 1, 2024, to Feb 28, 2025.

Analysts pointed to recent collective sales, including that of Thomson View Condominium which was acquired by a joint venture between UOL and CapitaLand for $810 million, or $1,178 per sq ft per plot ratio (psf ppr).

Mr Karamjit Singh, chief executive of property consultancy Delasa, noted that “selected sectors in the non-landed residential segment have seen rate increases of 2.5 per cent to 3 per cent where recent land sales have taken place, such as Faber Walk, Dairy Farm and Thomson View Condo”. LBC increases in the River Valley Green sector were among the highest at 4 per cent, he added.

GuocoLand’s top bid of $627.8 million for River Valley Green (Parcel B) in early February works out to $1,420 psf ppr. This is about 7 per cent higher than the $1,325 psf ppr that Wing Tai paid for a nearby site, River Valley Green (Parcel A), at a state tender that closed in June 2024.

The strongest LBC growth was in River Valley, Killiney, Clemenceau Avenue and Outram Road, noted ERA Singapore’s head of research and market intelligence Wong Shanting. “This is not surprising considering the number of Government Land Sales sites sold in the past year at new benchmark land prices. In the vicinity of Zion Road, four sites have been awarded, including the River Valley Green (Parcel B) site,” she said.

In comparison, for landed residential use, LBC rates will rise by 3 per cent on average, compared with a 2.8 per cent jump in the previous revision period.

This is due to a continual rise in land values of more than 20 per cent recorded for landed homes in Holland Road/Dunearn Road/Sixth Avenue and in Bukit Batok/Jurong Road, said Dr Chua Yang Liang, head of research and consultancy for South-east Asia at property consulting group JLL. “Strong upward pressure on the landed housing market could have motivated the chief valuer to increase LBC rates across all 118 sectors,” he added.

In contrast, LBC rates for commercial use will edge up a marginal 0.6 per cent on average, compared with a 1.5 per cent rise in the previous revision period.

Ms Tricia Song, the head of research for Singapore and South-east Asia at CBRE, noted that LBC rates for office-dominant sectors such as those in the Central Business District were flat, while the non-award of a mega white site in Jurong Lake District meant there were no benchmark changes in that sector.

“Hence, the rise in LBC rates for commercial use was mainly seen in the Orchard (Road) area, where retail businesses benefited from leisure and business travellers, with a major transaction in Ion Orchard – the sale of a 50 per cent stake for $1.85 billion in September 2024 – setting a benchmark,” she said.

LBC rates for industrial use will climb 0.1 per cent on average after remaining unchanged in the previous revision period, due to an uncertain external trade demand outlook, Dr Chua said.

LBC rates for hotels and hospitals will again rise by 0.6 per cent on average, after a 0.6 per cent growth in the previous revision period.

Knight Frank Singapore research head Leonard Tay pointed to institutional investor interest in hospitality due to rising tourism arrivals in Singapore, and more entertainment as well as Mice (meetings, incentives, conventions and exhibitions) events.

For the first time in more than a decade, LBC rates for place of worship/civic and community institution use will jump 6 per cent on average. This is after remaining unchanged in the previous revision period.

Left unchanged are the rates for the other use group, covering open space/nature reserve, agriculture and drains/roads/railways.

‍

‍

Credits: The Straits Times