Average Land Betterment Charges 28 Landed Down 54 Non Landed Housing
The Singapore Land Authority (SLA) has recently released the latest rates for Land Betterment Charge (LBC) for the period of 1 Sep 2024 to 28 Feb 2025. These rates have seen an increase for most use groups such as commercial, landed residential, and hotel and hospital use groups. However, the LBC rates for non-landed residential use group have declined compared to the previous review in March.
The average LBC rates for non-landed residential use have decreased by 5.4%, which is a reversal from the 0.1% increase in March. Chua Yang Liang, the head of research and consultancy for Southeast Asia at JLL, attributes this decline to various factors such as the ongoing property cooling measures, high interest rates, and rising global geopolitical risks, which have resulted in a loss of investor and developer appetite in this market.
According to Chua, the average decline in land values across the island is estimated to be around 13%, predominantly 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 notes that it is no surprise that the LBC rates for the non-residential sector have also declined by an average of 5.4%.
Out of 118 sectors, 116 have registered a decline in LBC rates, ranging from 2% to 16%. The biggest decline of 15.4% was seen in Sector 108 (Commonwealth/Queen Astrid/Watten). Lee Sze Teck, the senior director of data analytics at Huttons Asia, attributes this decline to the relatively subdued land sales market in the past six months, as a result of high interest rates, construction costs, and modest take-up at new condo launches.
However, the ramp-up in government land sales (GLS) has seen more sites being sold between March and August, with land bids being within expectations after accounting for the different operating environment, according to Teck. He adds that the expected lower US interest rates could lead to lower borrowing rates in Singapore, which may push buyers who have been waiting on the sidelines to enter the market. This could, in turn, lead to an increase in demand and prices. However, Teck believes that developers are expected to remain cautious while bidding for land, which will result in stable LBC rates for non-landed residential properties.
The lower LBC rates for non-landed residential use group are not expected to lead to an increase in en bloc sales. On the other hand, the landed residential use group has seen an average increase of 2.8% in LBC rates compared to a 7.8% hike in the previous review. Out of 118 geographical sectors, over 97% saw an increase of about 3%, with the remaining three sectors seeing no change. Teck 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 the reviewed period was an uncompleted GCB in Tanglin Hill that was sold for $93.3 million.
For the commercial group, the LBC rates have increased by an average of 1.5% compared to a 3.8% increase in March. Out of 118 sectors, about 44% saw an increase in LBC rates, ranging from 3% to 5%. Some of the high quantum deals in this segment include the sale of Paragon REIT’s The Rail Mall, a 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 expects the expected US interest rate cut to “lift the fog of uncertainty clouding the investment markets in and around Asia”. He also notes that several commercial buildings were also sold in recent months, such as the sale of 30 Prinsep Street by Income Insurance, the sale of Mapletree Anson by Mapletree Pan Asia Commercial Trust, and the sale of 20 Harbour Drive by Mapletree Investments.
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In conclusion, the average 1.5% increase in LBC rates for the commercial group and the decline of 5.4% in LBC rates for the non-landed residential use group, provided by the chief valuer, does not come as a surprise to JLL’s Chua. He believes that despite the decrease in LBC rates for non-landed residential use, developers will continue to remain cautious while bidding for land, resulting in stable LBC rates.
