Mr Desmond Sim, Head of Research, Singapore & Southeast Asia
The DC rate revision is usually retrospective on how the real estate market has been performing. Not surprisingly, increased activities in the office and hotel markets have resulted in upward revisions in the DC rates, while a slowdown in residential land activity has resulted in lowered DC rates for some key areas.
Group A (Commercial)
Sectors 25, 28, 29, 30 and 93 all witnessed the largest increase for DC rates at 17.4%. The increase reflected a healthy level of activities in the shophouse market in these sectors. Similarly, sectors 15, 16 and 21 all registered 16.7% increases.
Group B (Residential Non-landed)
On the back of a muted collective sale market and the lower-than-expected land bids arising from Kampong Java and Dairy Farm Road sites, subdued land price expectations followed.
Interestingly, both sectors 91 and 94 saw downward DC revisions of 13.3% each, while sectors 93 and 104 saw corrections of 13.0% each.
While these identified sectors do not correspond directly with the two GLS sites that had lower-than-expectation bids, it should be noted that these sectors are part of the new areas identified by the “Revision to Guidelines for Maximum Allowable Dwelling in Non-Landed Residential Developments Outside the Central Area” that took effect from 17 January 2019.
Group C (Hotel/Hospital)
In light of strong investment interest and activity in the hospitality market, sectors 25, 26, 28, 29, 30, 32, 33 and 34 saw an increase of 73.9% each in the DC rates.
Golden Wall Centre, which was transacted in November 2018 for $2,331 psf per GFA, was announced that it is likely to be converted for Hotel use. Similarly, Waterloo Apartments has the same intention of change of use to Hotel. It is located in sector 27, which also saw an increase of 66.7%.
The recent GLS site for Hotels that was sited along Club Street, saw a healthy bidding of 8 bidders, of which the winning bid was 12.4% above the runner up. This site is located in sector 16 which saw an increase of 52.8%.
Conclusion
In summary, the DC rates revision often rely on actual transactions or market indicators and may be affected by policy changes at times. Hence, the DC rate revisions for the period of 1 March 2019 to 31 August 2019 is a good barometer for the real estate capital market.
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