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Average Land Betterment Charges 28 Landed Down 54 Non Landed Housing

Posted on September 9, 2024 by mentorshiponline

The latest Land Betterment Charge (LBC) rates for the period of 1 Sep 2024 to 28 Feb 2025 have been released by the Singapore Land Authority. These rates have seen an increase for most use groups, including commercial, residential (landed), and hotel and hospital use groups. However, the residential (non-landed) use group experienced a decline in LBC rates.

The average LBC rates for the non-landed residential use group decreased by 5.4%, which is a reversal from the 0.1% increase in March. According to Chua Yang Liang, head of research and consultancy for Southeast Asia at JLL, this decline can be attributed to the “overhanging property cooling measures, a high interest rate environment, and rising global geopolitical risks have resulted in a loss in investor and developer appetite in this market”.

Overall, it is estimated that there has been an average decline of 13% in land values across the island, mainly due to recent government land sales sites in Sectors 108, 112 and 115 (Holland Rd/ Dunearn Rd/ Sixth Ave, West Coast Road/Jurong East, Sembawang/ Mandai/ Woodlands).

Chua notes that it is not surprising that LBC for the non-residential sector has also declined by an average of 5.4%. In fact, over 90% or 116 of 118 sectors registered a decline in LBC rates ranging from 2% to 16%. The sector with the largest decline was Sector 108 (Commonwealth/Queen Astrid/Watten), with a decrease of 15.4%. Lee Sze Teck, senior director of data analytics at Huttons Asia, believes that this decline can be attributed to the relatively subdued land sales market in the past six months, along with high interest rates, construction costs, and modest take-up at new condo launches.

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However, there has been a ramp-up in government land sales (GLS), with more sites sold between March and August. According to Lee, land bids have been within expectations, taking into account the different operating environment. He also notes that the expected lower US interest rates could lead to a downward trend in borrowing rates in Singapore, potentially pushing up demand and prices as buyers enter the market.

Lee adds that while developers may need to replenish their land bank earlier if there is an improvement in sales take-up at new project launches, they are still expected to remain cautious in bidding for land. Therefore, LBC rates for non-landed residential properties are expected to remain stable.

The lower LBC rates for the non-landed residential use group should not lead to an increase in en bloc sales. In fact, LBC rates for the landed residential use group saw an average increase of 2.8%, compared to the 7.8% hike during the last review in March. Over 97% or 115 out of 118 geographical sectors saw an increase in LBC rates of about 3%, with only three sectors seeing no change. According to Lee, this increase can be attributed to a pick-up in landed transactions and high quantum deals in the Good Class Bungalow (GCB) market. One notable example is the sale of an uncompleted GCB in Tanglin Hill for $93.3 million.

For the commercial use group, LBC rates increased by an average of 1.5%, compared to the 3.8% increase in March. About 44% or 52 out of 118 sectors saw an increase in LBC rates ranging from 3% to 5%, while there was no change in the remaining 66 sectors. Lee notes that there was slightly more interest in this segment, possibly due to some assets linked to a money laundering case during this period. High quantum deals, such as the sale of Paragon REIT’s The Rail Mall and Mapletree Anson, also contributed to this increase.

According to Chua from JLL, the expected US interest rate cut may help to “lift the fog of uncertainty” in investment markets in and around Asia. There have been several commercial building sales in recent months, including the sale of 30 Prinsep Street, Mapletree Anson and 20 Harbour Drive.

In conclusion, it is not surprising that the chief valuer has provided an average 1.5% increase in LBC rates, according to JLL’s Chua.

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