Average Land Betterment Charges 28 Landed Down 54 Non Landed Housing
Singapore Land Authority (SLA) has recently announced the latest Land Betterment Charge (LBC) rates for the period of 1 Sep 2024 to 28 Feb 2025. The rates have shown an overall increase for most use groups such as commercial, residential (landed), and hotel and hospital use groups. However, for the residential (non-landed) use group, there has been a decline in LBC rates.
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The average LBC rates for the non-landed residential use group have decreased by 5.4%, a significant decrease compared to the 0.1% increase in March. According to Chua Yang Liang, head of research and consultancy for Southeast Asia at JLL, this decline is due to various factors such as the existing property cooling measures, high interest rates, and rising global geopolitical risks. These factors have resulted in a loss of investor and developer interest in this market.
On the other hand, there has been an average decline of 13% in land values across the island, which is mainly driven by 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 further adds that the 5.4% decline in LBC rates for the non-residential sector is not surprising, as over 90% or 116 of 118 sectors have registered a decline in rates ranging from 2% to 16%. The biggest decline was seen in Sector 108 (Commonwealth/Queen Astrid/Watten) with a 15.4% decline.
Lee Sze Teck, senior director of data analytics at Huttons Asia, attributes the decline in LBC rates for the non-residential sector 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. However, with the expected lower US interest rates, the borrowing rates in Singapore are expected to trend downwards, which may lead to an increase in demand and prices, pushing buyers to enter the market. Lee also adds that developers are expected to remain cautious in bidding for land, which may result in stable LBC rates for non-landed residential properties.
The lower LBC rates for the non-landed residential use group are not expected to lead to an increase in en bloc sales. There has been a 2.8% average increase in LBC rates for the landed residential use group, which is significantly lower compared to the 7.8% increase during the last review in March. Over 97% or 115 out of 118 sectors have shown an increase in LBC rates of around 3%, with the remaining three sectors seeing no change. This can be attributed to a pick-up in landed transactions and high quantum deals in the Good Class Bungalow (GCB) market. Notably, the largest GCB deal by quantum during the reviewed period was an uncompleted GCB in Tanglin Hill that was sold for $93.3 million.
In the commercial group, there has been a 1.5% average increase in LBC rates, which is lower compared to the 3.8% increase in March. About 44% or 52 out of 118 sectors have shown an increase in rates ranging from 3% to 5%, with no change in the remaining 66 sectors. According to Lee, there has been slightly more interest in this segment, with some assets linked to a money laundering case resulting in a higher quantum. He also notes that several high quantum deals have been made, including the sale of Paragon REIT’s The Rail Mall, a 999-year leasehold three-storey shophouse at 182 Telok Ayer Street, and 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”. He also remarks that several commercial buildings have been sold recently, including 30 Prinsep Street by Income Insurance ($142 million), Mapletree Anson by Mapletree Pan Asia Commercial Trust ($775 million), and 20 Harbour Drive by Mapletree Investments ($160 million). Overall, Chua is not surprised by the average 1.5% increase provided by the chief valuer.