CBRE commentary on the Revision of Land Betterment Charge Rates from 1 March 2024

By Tricia Song (宋明蔚), Head of Research, Southeast Asia, CBRE

The Singapore Land Authority (SLA) has revised the Land Betterment Charge (LBC) rates for the period 1 Mar 2024 to 31 August 2024. The review is carried out on a half-yearly basis in consultation with the Chief Valuer. 

LBC rates rose on average for Use Groups A – D, led by Use Group B1 (Landed Residential) at 7.8% and Use Group A (Commercial) at 3.8%. Use Group D (Industrial) saw a moderate increase of 1.7% while C (Hotel/Hospital) and B2 (Residential, non-landed) saw marginal increases of 0.7% and 0.1% respectively. 

CBRE Analysis:
• The LBC rates for Use Group A (Commercial) have risen by 3.8%, after a flattish 0.4% rise in the previous cycle. 104 out of 118 sectors saw an increase ranging from 3 – 9%, likely due to a few large-ticket office and retail property transactions such as Far East Shopping Centre and Shenton House. We expect this may dampen sentiment for commercial collective sales in the near term.  

• B1 (Residential, landed) LBC rates saw a sharp increase of 7.8% on average, after no change in the last round of revision. It was a broad-based increase with 116 out of the 118 sectors seeing a rise in LBC rates ranging from 7 – 8% and the remaining 2 sectors seeing no change. We believe this largely reflects the 8% increase in the landed private home price index growth for 2023.

• The LBC rates for Use Group B2 (Residential, non-landed) have increased by 0.1% on average after rates fell 3.2% on average in Sep 2023. The performance among different locations was diverse, with 37 out of 118 sectors seeing an increase ranging from 3 – 14%, 27 out of the 118 sectors observing a decrease of 1 – 19% and the remaining 54 sectors seeing no change. Amid a dearth of residential collective sales since Q3 2023, revisions for Group B2 sector largely tracked performance at state land tenders. The polarised performance across various sectors mirrored the contrasting sentiments between suburban and non-suburban sites seen at GLS tenders over the past six months. In particular, the weaker-than-expected bids for the prime Orchard Boulevard site brought down the rates for its surrounding areas, while better-than-expected bids for Toa Payoh and Clementi sites boosted rates for their respective sectors. The significant drop in LBC rates may encourage more prime residential collective sales, but the punitive ABSD rates for foreigners and developers are still quite daunting and developers are likely to continue to tread with caution.
   
• The LBC rates for Use Group C (Hotel/Hospital) rose by 0.7% on average, after increasing 3.0% in the previous round. 18 out of the 118 sectors saw an increase in rates of around 5% with the remaining sectors seeing no change. Increases are mainly seen in the CBD and Orchard Road areas, which have seen record room rates from increased visitor arrivals.

• The LBC rates for Use Group D (Industrial) rose by 1.7% on average, after remaining flat for previous two rounds. 42 out of the 118 sectors saw an increase in LBC rates ranging from 3 – 5%, with the remaining 76 sectors seeing no change. This could be due to a few significant transactions such as Noel Building, Tampines North Drive 4 (Plot 1) and Tanglin Halt Industrial Estate.

Group A
The LBC rates for Use Group A (Commercial) have increased by 3.8% on average, faster than the marginal increase of 0.4% in Sep 2023. 104 out of the 118 sectors saw an increase in LBC rates ranging from 2.7% to 9.0%, with the remaining 14 sectors seeing no change. The increases were likely due to a few office and retail enbloc transactions. 

The largest increase of 9.0% stemmed from Sectors 41 (Bideford/ Cuppage/ Kramat/ Koek/ Kiliney/ Somerset/ Exeter) and 42 (Orchard Road/ Orchard Turn/ Scotts/ Claymore), within which 9 Emerald Hill Road transacted for $16.00 mil in Dec 2023, while Far East Shopping Centre fetched $908.00 mil ($3,350 psf) in Sep 2023. 

Sector 7 (Cecil/ Robinson/ Shenton/ Boon Tat/ McCallum) also rose 8.3%. This sector saw a collective sale of Shenton House in Nov 2023 for $538.00 mil ($1,889 psf).

Notable revisions to LBC rates for Use Group A

Sector	Percentage change
41 (Bideford/ Cuppage/ Kramat/ Koek/ Kiliney/ Somerset/ Exeter)	+9.0%
42 (Orchard Road/ Orchard Turn/Scotts/Claymore)	+9.0%
7 (Cecil/ Robinson/ Shenton/ Boon Tat/ McCallum)	+8.3%

Source: CBRE Research, SLA

Group B1 (Residential Landed)
The LBC rates for Use Group B1 (Residential, landed) have risen by 7.8% on average, following no changes in Sep 2023. 116 out of 118 sectors saw an increase ranging from 7.5% to 8.4%, with the remaining 2 sectors seeing no change.

Notable revisions to LBC rates for Use Group B1

Sector	Percentage change
65 (Trevose/ Merryn/ Kheam Hock/ Tudor/ University/ Camden)	+8.4%
109 (King Albert/ Holland/ Turf Club)	+8.4%
108 (Commonwealth/ Queen Astrid/ Watten)	+8.1%

Source: CBRE Research, SLA

13 sectors were tied for the largest increase of 8.4% including Sector 65 (Trevose/ Merryn/ Kheam Hock/ Tudor/ University/ Camden) and Sector 109 (King Albert/ Holland/ Turf Club). Following close behind was Sector 108 (Commonwealth/ Queen Astrid/ Watten) which recorded a rate increase of 8.1%. All 3 sectors saw a healthy number of GCB and landed transactions. 
• In Sector 65, 2 GCBs along Chee Hoon Avenue were transacted, the larger of which at 46 Chee Hoon Avenue changed hands for $26.70 mil ($2,413 psf on land area).
• 2 GCBs were also transacted in Sector 109. 56 Garlick Avenue and 20A King Albert Park were sold for $19.50 mil ($1,885 psf on land area) and $24.80 mil ($1,619 psf on land area) respectively.
• Sector 108 saw 2 GCBs and 12 other landed properties change hands. Notably, Hin Leong founder Ok Lim’s property at 20 Third Avenue was sold to a Singapore family for $26.50 mil ($1,818 psf on land area).

The increase in Group B1 is largely within expectations, with resilience observed in the broader landed residential market and GCB segment where average prices have held firm despite a slowdown in sales activity and weak macroeconomic conditions.

Group B2 (Residential Non-Landed)
The LBC rates for Use Group B2 (Residential, non-landed) have risen by 0.1% on average, rebounding from a 3.2% decline in Sep 2023. Performance across geographical sectors was diverse, however, with 37 out of 118 sectors seeing an increase ranging from 3 – 14%, 27 out of the 118 sectors observing a decrease of 1 – 19% and the remaining 54 sectors seeing no change. The largest decrease of -19.2% applied to Sector 43 (Cuscaden Road/ Tomlinson Road/ Tanglin Road) while the largest increase of 14.0% was recorded for Sector 112 (West Coast/ Clementi/ Faber/ Sunset/ Jurong East/ Toh Tuck/ Bukit Batok Industrial).

Notable revisions to LBC rates for Use Group B2

Sector	Percentage change
112 (West Coast/ Clementi/ Faber/ Sunset/ Jurong East/ Toh Tuck/ Bukit Batok Industrial)	+14.0%
103 (Serangoon Central/ Potong Pasir/ Toa Payoh/ Braddell Road/ Bishan)	+10.7%
115 (Pierce & Seletar Reservoir/ Mandai/ Marsiling/ Senoko)	+5.3%
113 (Bukit Batok/ Hillview/ Hume/ Cashew/ Bukit Panjang/ Choa Chu Kang)	+5.2%
13 (Marina Gardens Drive/ Marina Grove/ Marina South Drive)	-4.8%
44 (Grange Garden/ One Tree Hill/ Jalan Arnap/ Jalan Kelawar/ Angulia)	-18.8%
43 (Cuscaden Road/ Tomlinson Road/ Tanglin Road)	-19.2%

Source: CBRE Research, SLA

The largest increase seen in Sector 112 could be due to healthy interest at Clementi Avenue 1 GLS site which received 6 bids and was awarded in Nov 2023 to a joint venture between China Construction (South Pacific) Development Co and MCL Land for $633.45 mil ($1,250 psf ppr). The second largest increase of 10.7% was observed at Sector 103 (Serangoon Central/ Potong Pasir/ Toa Payoh/ Braddell Road/ Bishan), likely tied to Lorong 1 Toa Payoh GLS site which was awarded to a consortium between CDL, Frasers Property and Sekisui House in Nov 2023 for $968.00 mil ($1,360 psf ppr), at a unit price above market expectations.

Other notable sectors which posted increases could be attributed to stable interest seen at suburban and EC GLS tenders. These include sector 115 (Pierce & Seletar Reservoir/ Mandai/ Marsiling/ Senoko) (+5.3%) and sector 113 (Bukit Batok/ Hillview/ Hume/ Cashew/ Bukit Panjang/ Choa Chu Kang) which posted 5.2% growth.
• In Sector 115, Champion’s Way GLS site saw firm interest, receiving 6 bids and was awarded to a CDL entity for $294.89 mil ($904 psf ppr). 
• In Sector 113, EC sites Plantation Close and Plantation Close Parcel B EC sites saw strong developer participation. The former was awarded in Sep 2023 to a joint venture between Hoi Hup Realty and Sunway Developments for $348.50 mil ($703 psf ppr) after drawing a robust 9 bids at the closing of its Concept and Price Tender in Jun 2023, signalling strong confidence in the EC market. After which the latter was also awarded to Hoi Hup Realty and Sunway Developments in Feb 2024 at stable pricing of $423.38 mil ($701 psf ppr).

Conversely, sectors which saw state land tenders that received lacklustre interest with bid prices at the lower end of market expectations observed decrease in LBC rates. 
• Sector 44 (Grange Garden/ One Tree Hill/ Jalan Arnap/ Jalan Kelawar/ Angulia) which saw the award of GLS tender at Orchard Boulevard recorded the second steepest decline of -18.8%. The site at Orchard Boulevard received 4 bids and was awarded on 21 Feb 2024 to a tie-up between UOL Group and Singapore Land for $428.28 mil or $1,617 psf ppr, significantly below market expectations. The site’s muted performance appears to have spilled over to neighbouring Sectors 42 (Orchard Road/ Orchard Turn/Scotts/Claymore) and 43 (Cuscaden Road/ Tomlinson Road/ Tanglin Road) of which the latter recorded the steepest rate decline of -19.2% while Sector 42 was tied for second place at -18.8%.
• We note that Sector 13 (Marina Gardens Drive/Marina Grove/Marina South Drive) where the unawarded Marina Gardens Crescent GLS site is located saw a moderate decrease in LBC rate of 4.8%. The site received a sole bid of $770.46 mil ($984 psf ppr) from a tie-up between GuocoLand, Hong Leong Holdings and Mitsui Fudosan Co. but was not awarded and moved to the H1 2024 Reserve List on 8 Feb 2024 as the bid was assessed to be too low. The Chief Valuer probably took into account the earlier Marina Gardens Lane residential site located just across the road which was awarded on 11 Jul 2023, to a Kingsford unit for the top bid price of $1.035 bn or $1,402psf ppr.

Group C (Hotels and Hospitals)
LBC rates for hotels and hospitals in this cycle rose by an average of 0.7%, easing from the average of 3.0% in Sep 2023. Only 18 out of 118 sectors saw an increase in LBC rates ranging from 4.7% to 5.1%, with the remaining 100 sectors seeing no change. The rise in LBC rates was mainly in the CBD and Orchard areas, where hotels benefitted strongly from demand from both leisure and business travellers. 

Notable revisions to LBC rates for Use Group C

Sector	Percentage change
7 (Cecil/ Robinson/ Shenton/ Boon Tat/ McCallum)	+5.1%
4 (Middle/ Rochor/ North Bridge/ Victoria/ Ophir)	+5.0%
39 (Stevens/ Draycott Park & Drive/ Ardmore Park/ Anderson)	+5.0%
40 (Cairnhill/ Peck Hay/ Mount Elizabeth/ Jalan Elok/ Jalan Jintan/ Hullet)	+5.0%
41 (Bideford/ Cuppage/ Kramat/ Koek/ Kiliney/ Somerset/ Exeter)	+5.0%
42 (Orchard Road/ Orchard Turn/ Scotts/ Claymore)	+5.0%
67 (Dalvey Road/ Stevens Road/ Anderson Road/ Orange Grove Road/ Tanglin Road/ Napier Road/ Cluny Road)	+5.0%

Source: CBRE Research, SLA

Group D (Industrial)
LBC rates for industrial in this cycle rose by an average of 1.7%, after remaining flat for the previous two cycles. 42 out of the 118 sectors saw an increase in LBC rates ranging from 2.8 – 5.2%, with the remaining 76 sectors seeing no change. This could be due to a few large transactions as REITs sought to divest their assets against the backdrop of decreasing tenure and high refinancing rates.

Sectors 51 – 59 saw the largest increases of 5.1 – 5.2%, while 23 other sectors saw an increase of 5.0% in LBC rates.

Some of the transactions that could have lent support to the rise in LBC rates include the collective sale of Noel Building (Sector 103) for $81.18 mil ($895 psf) and the award of the Tampines North Drive 4 (Plot 1) (Sector 98) site for $85.82 mil ($173 psf ppr) in Nov 2023, as well as the Tanglin Halt Industrial Estate (Sector 108) purchase for $50.60 mil ($199 psf) in Feb 2024.

Notable revisions to LBC rates for Use Group D

Sector	Percentage change
51 (Nicoll/ Republic/ Beach Road/ Crawford Centre)	+5.2%
52 (Kampong Bugis/ Geylang Road)	+5.2%
53 (Jellicoe/ King George's/ Tyrwhitt/ Jalan Besar/ Serangoon)	+5.2%
55 (Upper Boon Keng/ Geylang Lorong 1 & 3)	+5.2%
57 (Serangoon/ St Michael's & George's/ Towner)	+5.2%
58 (Rangoon/ Oxford/ Owen/ Dorset/ Farrer Park)	+5.2%
59 (Balestier/ Novena/ Jalan Rajah & Datoh/ Ah Hood)	+5.2%
98 (Chai Chee/ Bedok North & Reservoir/ Tanah Merah/ Tampines)	+5.0%
103 (Serangoon Central/ Potong Pasir/ Toa Payoh/ Braddell Road/ Bishan)	+5.0%
108 (Commonwealth / Queen Astrid/ Watten)	+5.0%

Source: CBRE Research, SLA

Read the SLA press release here.