Average Land Betterment Charges 28 Landed Down 54 Non Landed Housing
The Singapore Land Authority has just announced the latest Land Betterment Charge (LBC) rates for the period of 1 Sep 2024 to 28 Feb 2025. The rates have shown an increase for most use groups, such as commercial, residential (landed), and hotel and hospital use. On the other hand, the LBC rates for the residential (non-landed) use group have declined.
For the non-landed residential use group, the average LBC rates have decreased by 5.4%, which is a complete reversal from the previous increase of 0.1% in March. According to Chua Yang Liang, the head of research and consultancy for Southeast Asia at JLL, this decline can be attributed to several factors, including property cooling measures, a high interest rate environment, and rising geopolitical risks, which have caused a decrease in both investor and developer appetite in the market.
In recent news: The average Land Betterment Charge for residential, non-landed use experiences a drop of between 3% and 11%
Overall, Chua has estimated that there is an average decline of 13% in land values across the island, mainly due to the recent sales of government land sites in Sectors 108, 112, and 115 (Holland Road, Dunearn Road, Sixth Avenue, West Coast Road, Jurong East, Sembawang, Mandai, and Woodlands).
Chua further adds that the decrease in LBC rates for the non-residential sector was expected, with over 90% of 118 sectors registering a decline ranging from 2% to 16%. Sector 108 (Commonwealth, Queen Astrid, and Watten) saw the biggest decline of 15.4%. According to Lee Sze Teck, the senior director of data analytics at Huttons Asia, the decrease in LBC rates can be attributed to the relatively subdued land sales market in the past six months, due to high interest rates, rising construction costs, and modest take-up rates at new condo launches.
The ramp-up of government land sales between March and August has seen more sites being sold, with land bids falling within expectations after considering the current operating environment, says Lee.
In addition, the expected lower interest rates in the US could cause borrowing rates in Singapore to trend downwards, which could potentially push buyers waiting on the sidelines to enter the market. This could result in an increase in demand and prices. However, Lee notes that developers are still expected to remain cautious when bidding for land, which means that LBC rates for non-landed residential properties are estimated to remain stable.
In other news: Land betterment charge rates rise marginally for residential properties
However, the lower LBC rates for the non-landed residential use group are not expected to lead to an increase in en bloc sales. Comparatively, LBC rates have only increased by 2.8% on average for the landed residential use group, as compared to the 7.8% hike in the previous review in March. More than 97% of 118 geographical sectors saw an increase in LBC rates, with the remaining three sectors seeing no change.
According to Lee, this increase can be attributed to the pick-up in landed transactions and high-value deals in the Good Class Bungalow (GCB) market. The top GCB deal during the review period was the sale of an uncompleted GCB in Tanglin Hill for $93.3 million.
The commercial group has also seen an average increase of 1.5% in LBC rates, compared to the 3.8% increase in March. Around 44% of the 118 sectors have seen an increase in LBC rates, ranging from 3% to 5%, with the remaining 66 sectors seeing no change. Lee notes that there has been slightly more interest in the commercial segment, with some assets linked to the money laundering case being concluded during this period.
In recent months, there have been several high-value deals, including the sale of Paragon REIT’s The Rail Mall along Upper Bukit Timah Road, a three-storey shophouse with 999-year leasehold at 182 Telok Ayer Street, and the sale of strata-titled units at the freehold Grade A commercial development, Solitaire on Cecil in the CBD.
JLL’s Chua expects the expected US interest rate cut to “lift the fog of uncertainty clouding the investment markets in and around Asia”. In addition, there have been several other commercial buildings sold in recent months, including the sale of 30 Prinsep Street by Income Insurance for $142 million, the sale of Mapletree Anson by Mapletree Pan Asia Commercial Trust for $775 million, and the sale of 20 Harbour Drive by Mapletree Investments for $160 million.
The Clementi Avenue 1 site has gained significant attention, possibly due to its smaller gross floor area and subsequently lower land cost. This observation was made by an industry expert who also noted a decline in the number of developers vying for the tender, as compared to the other two sites which only saw three bidders each. It is worth mentioning that the newly launched Elta Condo has also caught the interest of potential buyers.
In conclusion, Chua remarks that the average 1.5% increase provided by the chief valuer is not surprising, considering all the factors mentioned above.