"Bullish" valuations and transactions in hotel/hospital and commercial sectors of the Singapore market are believed to have contributed to a Development Charges Rates increase from the Ministry of National Development.

Revised on a half-yearly basis, development charges are payable when planning permission is granted to carry out development projects that increase the value of the land.

At a glance: 

• Singapore Ministry of National Development has announced development charge revision for the period of September 1, 2018, to 28 February, 2019.
• Commercial and hotel/hospital sectors experienced increases, while there was a decline in residential (non-landed) usage group.
• Colliers said the revision reflects the current market conditions.

On February 28, the Ministry announced a revision is based on rates for the period of September 1, 2018, to 28 February 2019.  

The DC rates for Commercial use increased by 9.8% on average – the highest rate of growth since March 2014 when it grew 14.6%.

The steepest rise of 17.4% was seen in eight sectors covering areas that include Outram Road, Chinatown, New Bridge Road, Selegie Road, Victoria Street, Jalan Besar, Geylang Road amongst others.

Colliers International Singapore Head of Research Tricia Song said the growth was "largely expected".

"We believe the increase in the commercial use DC rates in these areas are mainly due to the bullish valuations in the shophouse segments in these locations, as well as the rising office and stabilising retail markets in general," she said. 

There was also a sharp rise in the DC rates for hotels/hospitals, which swelled by 45.6% on average, reflecting the highest rate on record.

It comes after there was an 11.8% average increase in the previous revision announced on August 31, 2018.

Ms Song said some recent transaction could have contributed to the trend.

"The number of hotel deals has picked up in recent months," she said.

"There has been coupled with some bullish transaction prices, such as the collective sales of Waterloo Apartments and Golden Wall Centre (both to be converted to hotel use), the government land sale of Club Street hotel site, and the private sale of Ascott Raffles Place serviced apartments."

Not all sectors experienced growth, with DC rates for residential (non-landed) use decreasing by 5.5%, marking the first decline for the usage group since September 2016.

According to Colliers International, the largest drops appear to be in city fringe areas with large potential future supply such as East Coast and Hougang.

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