Singapore
CBRE commentary on the Revision of Land Betterment Charge Rates from 1 September 2023
September 4, 2023
Associated Contact
Melvin Lin
Head of Marketing & Communications, Singapore
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 September 2023 to 29 February 2024. The review is carried out on a half-yearly basis in consultation with the Chief Valuer.
LBC rates for Use Groups A (Commercial) and C (Hotel/Hospital) have increased, B2 (Residential, non-landed) decreased while that for Use Groups B1 (Landed Residential) and D (Industrial) have remained unchanged.
CBRE analysis:
• Despite the absence of big-ticket office or retail transactions, the LBC rates for Use Group A (Commercial) have risen by 0.4%. We believe the increases were due to the buoyant shophouse transactions, and signal the resilience of commercial property values, despite higher financing costs and macroeconomic weakness.
• The LBC rates for Use Group B2 (Residential, non-landed) have fallen by 3.2% on average, the first decline since Sep 2020. It is also a broad-based decline with 111 out of the 118 sectors seeing a decrease in LBC rates ranging from -3% to -11%, with the steepest declines in Marina Bay. These were evident in poor turnout in recent land bids and mirrored the softer sentiment across developers and buyers.
• The LBC rates for Use Group C (Hotel/Hospital) rose by 3% on average. 116 out of the 118 sectors saw an increase in rates ranging from 2.5% to 5.1%. With a lack of hotel transactions, the broad-based increase is driven by the strong recovery in hotel room rates and occupancy.
Group A
The LBC rates for Use Group A (Commercial) have increased by 0.4% on average. 12 out of the 118 sectors saw an increase in LBC rates ranging from 3.3% to 3.9%, with the remaining 106 sectors seeing no change. With few office or retail enbloc transactions, we believe the increases were imputed from shophouse transactions.
The largest increase of 3.9% stemmed from Sector 102 (Kallang Paya Lebar Expressway / Geylang area / Aljunied Walk / Sims Drive / Macpherson Road), within which 433, 435 Geylang Road fetched $30.00 mil in June.
Sector 16 (Duxton Road / Tanjong Pagar Road / Temple Street / Club Street / Mosque Street) also rose 3.7%. This sector saw one of the largest shophouse office buildings Liberty House sold in April for $92.20 mil ($3,193 psf).
Source: SLA, CBRE Research
Group B2 (Residential Non-Landed)
The LBC rates for Use Group B2 (Residential, non-landed) have fallen by 3.2% on average, the first decline since Sep 2020. It is also a broad-based decline with 111 out of the 118 sectors seeing a decrease in LBC rates ranging from -3% to -11%, while the remaining 7 sectors were unchanged.
The largest decrease of -11.1% applies to Sectors 11 (Shenton Way / Straits Boulevard / Marina Boulevard / Raffles Quay), 12 (Bayfront Area / Marina Bay Sands), 13 (Marina Mall / Marina Green / Marina South Drive / Marina Boulevard / Marina Gardens Drive) and 14 (Central Boulevard / Marina Coastal Drive / Marina South Pier).
Source: SLA, CBRE Research
The largest decline of -11.1% came from Sector 13 (Marina Mall / Marina Green / Marina South Drive / Marina Boulevard / Marina Gardens Drive). This could be due to the poor turnout at the maiden Marina South site at Marina Gardens Lane, which received 4 bids and was awarded in Jul 2023 to a Kingsford Development entity for $1.034 bn ($1,402 psf ppr).
However, other geographical sectors which saw the closing of GLS tenders in 2023 also observed decreases in LBC rates they received fewer-than-expected bids and bid prices at the lower end of market expectations.
Sector 107 which saw the award of GLS tenders at Lentor Gardens, Sector 98 which observed the award of Tampines Avenue 11 mixed-use site and Sector 92 which witnessed the award of Jalan Tembusu GLS, recorded declines in LBC rates of -6.3%, -5.3% and -4.5% respectively.
• The site at Lentor Gardens received 1 bid and was awarded on 13 Apr 2023 to a tie-up between GuocoLand and Hong Leong Group for $486.80 mil or $985 psf ppr. This was the lowest land bid among the five plots at Lentor that have been awarded so far.
• The mixed-use site at Tampines Avenue 11 received 3 bids and was awarded on 11 Jul 2023 to a consortium between UOL Group, Singapore Land and CapitaLand for $1.206 bn or $885 psf ppr.
• The site at Jalan Tembusu received 2 bids and was awarded on 10 Aug 2023 to Sim Lian Group for $828.00 mil or $1,069 psf ppr. This was a far cry from the Tembusu Grand site, just across the road, which was tendered in January 2022, received 8 bids and was awarded to a CDL and MCL consortium for $768.00 mil ($1,302 psf ppr).
Group C (Hotels and Hospitals)
LBC rates for hotels and hospitals in this cycle rose by an average of 3.0%, accelerating from the average of 1.0% in March 2019. The improvement is also more broad-based this round with 116 out of 118 sectors seeing an increase in LBC rates ranging from 3% to 5%. This could be due to a further recovery in the hotels sector in 2023 alongside an increase in both leisure and business travellers across all hotel tiers.
In July, 542-room Parkroyal on Kitchener Road was sold for $525.00 mil, or 24% above its December 2022 valuation.
Despite the lack of hotel transactions from March to August 2023, Singapore’s hotel market has recovered strongly, with hotels’ average daily rates (ADR) and revenue per available room (RevPAR) growing strongly year on year and even exceeding pre-pandemic (2019) levels.
According to STB, RevPAR in July 2023 was S$261.17, up 28.3% y-o-y, while average room rate was S$290.4 in July 2023, up 12.8% y-o-y.
Source: SLA, CBRE Research
Click here for more details of the announcement.
The Singapore Land Authority (SLA) has revised the Land Betterment Charge (LBC) rates for the period 1 September 2023 to 29 February 2024. The review is carried out on a half-yearly basis in consultation with the Chief Valuer.
LBC rates for Use Groups A (Commercial) and C (Hotel/Hospital) have increased, B2 (Residential, non-landed) decreased while that for Use Groups B1 (Landed Residential) and D (Industrial) have remained unchanged.
CBRE analysis:
• Despite the absence of big-ticket office or retail transactions, the LBC rates for Use Group A (Commercial) have risen by 0.4%. We believe the increases were due to the buoyant shophouse transactions, and signal the resilience of commercial property values, despite higher financing costs and macroeconomic weakness.
• The LBC rates for Use Group B2 (Residential, non-landed) have fallen by 3.2% on average, the first decline since Sep 2020. It is also a broad-based decline with 111 out of the 118 sectors seeing a decrease in LBC rates ranging from -3% to -11%, with the steepest declines in Marina Bay. These were evident in poor turnout in recent land bids and mirrored the softer sentiment across developers and buyers.
• The LBC rates for Use Group C (Hotel/Hospital) rose by 3% on average. 116 out of the 118 sectors saw an increase in rates ranging from 2.5% to 5.1%. With a lack of hotel transactions, the broad-based increase is driven by the strong recovery in hotel room rates and occupancy.
Group A
The LBC rates for Use Group A (Commercial) have increased by 0.4% on average. 12 out of the 118 sectors saw an increase in LBC rates ranging from 3.3% to 3.9%, with the remaining 106 sectors seeing no change. With few office or retail enbloc transactions, we believe the increases were imputed from shophouse transactions.
The largest increase of 3.9% stemmed from Sector 102 (Kallang Paya Lebar Expressway / Geylang area / Aljunied Walk / Sims Drive / Macpherson Road), within which 433, 435 Geylang Road fetched $30.00 mil in June.
Sector 16 (Duxton Road / Tanjong Pagar Road / Temple Street / Club Street / Mosque Street) also rose 3.7%. This sector saw one of the largest shophouse office buildings Liberty House sold in April for $92.20 mil ($3,193 psf).
Source: SLA, CBRE Research
Group B2 (Residential Non-Landed)
The LBC rates for Use Group B2 (Residential, non-landed) have fallen by 3.2% on average, the first decline since Sep 2020. It is also a broad-based decline with 111 out of the 118 sectors seeing a decrease in LBC rates ranging from -3% to -11%, while the remaining 7 sectors were unchanged.
The largest decrease of -11.1% applies to Sectors 11 (Shenton Way / Straits Boulevard / Marina Boulevard / Raffles Quay), 12 (Bayfront Area / Marina Bay Sands), 13 (Marina Mall / Marina Green / Marina South Drive / Marina Boulevard / Marina Gardens Drive) and 14 (Central Boulevard / Marina Coastal Drive / Marina South Pier).
The largest decline of -11.1% came from Sector 13 (Marina Mall / Marina Green / Marina South Drive / Marina Boulevard / Marina Gardens Drive). This could be due to the poor turnout at the maiden Marina South site at Marina Gardens Lane, which received 4 bids and was awarded in Jul 2023 to a Kingsford Development entity for $1.034 bn ($1,402 psf ppr).
However, other geographical sectors which saw the closing of GLS tenders in 2023 also observed decreases in LBC rates they received fewer-than-expected bids and bid prices at the lower end of market expectations.
Sector 107 which saw the award of GLS tenders at Lentor Gardens, Sector 98 which observed the award of Tampines Avenue 11 mixed-use site and Sector 92 which witnessed the award of Jalan Tembusu GLS, recorded declines in LBC rates of -6.3%, -5.3% and -4.5% respectively.
• The site at Lentor Gardens received 1 bid and was awarded on 13 Apr 2023 to a tie-up between GuocoLand and Hong Leong Group for $486.80 mil or $985 psf ppr. This was the lowest land bid among the five plots at Lentor that have been awarded so far.
• The mixed-use site at Tampines Avenue 11 received 3 bids and was awarded on 11 Jul 2023 to a consortium between UOL Group, Singapore Land and CapitaLand for $1.206 bn or $885 psf ppr.
• The site at Jalan Tembusu received 2 bids and was awarded on 10 Aug 2023 to Sim Lian Group for $828.00 mil or $1,069 psf ppr. This was a far cry from the Tembusu Grand site, just across the road, which was tendered in January 2022, received 8 bids and was awarded to a CDL and MCL consortium for $768.00 mil ($1,302 psf ppr).
Group C (Hotels and Hospitals)
LBC rates for hotels and hospitals in this cycle rose by an average of 3.0%, accelerating from the average of 1.0% in March 2019. The improvement is also more broad-based this round with 116 out of 118 sectors seeing an increase in LBC rates ranging from 3% to 5%. This could be due to a further recovery in the hotels sector in 2023 alongside an increase in both leisure and business travellers across all hotel tiers.
In July, 542-room Parkroyal on Kitchener Road was sold for $525.00 mil, or 24% above its December 2022 valuation.
Despite the lack of hotel transactions from March to August 2023, Singapore’s hotel market has recovered strongly, with hotels’ average daily rates (ADR) and revenue per available room (RevPAR) growing strongly year on year and even exceeding pre-pandemic (2019) levels.
According to STB, RevPAR in July 2023 was S$261.17, up 28.3% y-o-y, while average room rate was S$290.4 in July 2023, up 12.8% y-o-y.
Source: SLA, CBRE Research
Click here for more details of the announcement.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2024 revenue). The company has more than 140,000 employees (including Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves clients through four business segments: Advisory (leasing, sales, debt origination, mortgage servicing, valuations); Building Operations & Experience (facilities management, property management, flex space & experience, digital infrastructure services); Project Management (program management, project management, cost consulting); Real Estate Investments (investment management, development). Please visit our website at www.cbre.com.