DC hike impact varies from $0-$50 psf per plot ratio
By KALPANA RASHIWALA
(SINGAPORE) Property owners and developers are pondering their next move in the collective sale game as they weigh the impact of the hike in development charge rates on en bloc sales.
Will owners have to trim their price expectations? Or will developers bite the bullet and pay owners what they ask if the outlook for the high-end residential sector remains optimistic?
'For deals under discussion, it'll be a matter of who blinks first over the next month or so,' said Knight Frank executive director Foo Suan Peng.
He and other property consultants whom BT spoke to last night said that they have some en bloc cases with little or no DC component - in which case the rate hikes have either zero or little impact. An example is Grange Tower, which has no DC.
As for collective sales with a more sizeable DC component as a percentage of total land price, the DC rate hike will jack up the total land cost to the developer, assuming that the owners stick to their reserve price. But the extent varies.
"They reflect the increased value of property, backed by a strong, thriving economy.'
- City Developments' group general manager Chia Ngiang Hong on yesterday's DC rate hikes
In the case of Ardmore Point in the Ardmore Park location where the DC rate has increased by 36 per cent, the total DC quantum will increase by $48 psf per plot ratio or $8.2 million to $30.9 million. That would be under 4 per cent of the total land value of the prime freehold site.
Knight Frank's Mr Foo reckons yesterday's DC hikes could raise total land cost by zero to 3 per cent for the cases that his firm is handling.
Giving the impact in terms of unit land price, Jones Lang LaSalle's regional director and head of investments Lui Seng Fatt estimates yesterday's rate hikes will translate to zero to $30 psf ppr in additional cost for the collective sale sites that his firm is marketing.
CB Richard Ellis executive director Jeremy Lake sums up the work ahead for property consultants: 'We have to look at the impact of the changes and advise owners. Where the reserve price has been set, we've to see how developers react to the higher cost, whether it has any impact on their bids.'
'Ultimately, the impact will depend on the appeal of the site, how significant the DC component is, and how realistic the owners' price is,' he added.
Mr Lui said that going forward, owners' expectations would have to take into account the rate hikes, 'especially in areas with ample supply of sites'.
Giving a developer's perspective, City Developments' group general manager Chia Ngiang Hong said: 'The increase in DC rates will certainly have an impact on the assessment on all our future property acquisitions.'
As for its current land bank, the impact will be nominal as most of CDL's projects in the pipeline have already secured planning approvals and have thus locked in the DC rate.
Putting things in perspective, yesterday's DC rate hikes might not be such a bad thing after all.
'They reflect the increased value of property, backed by a strong, thriving economy,' as Mr Chia says.
