Average Land Betterment Charges 28 Landed Down 54 Non Landed Housing
The recent release of the latest Land Betterment Charge (LBC) rates by the Singapore Land Authority has brought about changes for the period of September 1, 2024 to February 28, 2025. In general, most use groups have seen an increase in LBC rates, including the commercial, residential (landed), and hotel and hospital use groups. However, there has been a decline in the LBC rates for the residential (non-landed) use group.
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For the non-landed residential use group, there has been an average decrease of 5.4% in LBC rates. This is a significant reversal from the increase of 0.1% reported in March. According to Chua Yang Liang, the 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 which have resulted in a loss of investor and developer appetite in this market.”
In addition, Chua estimates 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). He also notes that it is not surprising that the LBC for the non-residential sector has declined by an average of 5.4%.
Out of 118 sectors, over 90% (116) have registered a decline in LBC rates, ranging from 2% to 16%. The biggest decline was seen in Sector 108 (Commonwealth/Queen Astrid/Watten), with a decrease of 15.4%. Lee Sze Teck, the senior director of data analytics at Huttons Asia, believes that this decline in LBC rates can be attributed to the comparatively subdued land sales market in the past six months, as well as high interest rates, construction costs, and modest take-up at new condo launches.
However, there have been more government land sales (GLS) sites sold between March and August, with land bids that were “within expectations after factoring in the different operating environment,” according to Lee. He also notes that the expected lower US interest rates could lead to borrowing rates in Singapore trending downwards, which may attract buyers who have been waiting on the sidelines to enter the market, subsequently increasing demand and prices. Lee remarks that if the sales take-up at new project launches improves, developers may need to replenish their land bank earlier, but they are expected to remain cautious in bidding for land. Therefore, LBC rates for non-landed residential properties are estimated to remain stable.
Despite the lower LBC rates for the non-landed residential use group, there is not expected to be an increase in en bloc sales. On the other hand, LBC rates have increased by an average of 2.8% for the landed residential use group, compared to the 7.8% increase during the previous review in March. Out of 118 geographical sectors, over 97% (115) have seen an increase in LBC rates by about 3%, with the remaining three sectors showing no change. Lee attributes this increase to a pick-up in landed transactions, as well as high quantum deals in the Good Class Bungalow (GCB) market. The largest GCB deal by quantum during this period was the sale of an uncompleted GCB in Tanglin Hill for $93.3 million.
For the commercial use group, LBC rates have increased by an average of 1.5%, in comparison to the 3.8% increase in March. Out of 118 sectors, about 44% (52) have seen an increase in LBC rates ranging from 3% to 5%, with no change in the remaining 66 sectors. Lee notes that there has been slightly more interest in the segment, partly due to some assets being linked to a money laundering case that was concluded during this period. Notable high quantum deals include the sale of Maple Tree REIT’s The Rail Mall along Upper Bukit Timah Road, 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.
Chua from JLL expects the expected US interest rate cut to “lift the fog of uncertainty clouding the investment markets in and around Asia.” Recently, there have also been several commercial building sales, including the sale of 30 Prinsep Street by Income Insurance for $142 million, and the sale of Mapletree Anson by Mapletree Pan Asia Commercial Trust for $775 million. He concludes that the average 1.5% increase provided by the chief valuer does not come as a surprise.