Average Land Betterment Charges 28 Landed Down 54 Non Landed Housing

The most recent Land Betterment Charge (LBC) rates for the period of September 1, 2024 to February 28, 2025 have been released by the Singapore Land Authority. The majority of use groups have seen an increase in LBC rates, including commercial, residential (landed), and hotel and hospital use. However, the LBC rates for the residential (non-landed) use group have declined. The average LBC rates for this group have decreased by 5.4%, a significant change from the 0.1% increase in March.

According to Chua Yang Liang, the head of research and consultancy for Southeast Asia at JLL, this decline can be attributed to various factors such as the current property cooling measures, a high interest rate environment, and rising international geopolitical risks. These issues have led to a decrease in investor and developer interest in the non-landed residential market.

There has been an estimated average decline of 13% in land values across Singapore, largely influenced by recent government land sales in sectors 108, 112 and 115 (Holland Road/Dunearn Road/Sixth Avenue, West Coast Road/Jurong East, Sembawang/Mandai/Woodlands). Chua notes that it is not surprising that LBC rates for the non-residential sector have also decreased by an average of 5.4%.

In fact, over 90% of the 118 sectors have experienced a decline in LBC rates, ranging from 2% to 16%. The biggest decline was seen in sector 108 (Commonwealth/Queen Astrid/Watten) with a decrease of 15.4%. Lee Sze Teck, senior director of data analytics at Huttons Asia, attributes this decline to the slow land sales market in the past six months, as well as high interest rates, construction costs, and modest take-up at new condo launches.

However, with the recent increase in government land sales, more sites have been sold between March and August, with the land bids falling within expectations in the current operating environment, says Teck. The predicted decrease in US interest rates may lead to a decrease in borrowing rates in Singapore, potentially attracting more buyers to enter the market and driving up demand and prices. Nevertheless, developers are expected to remain cautious in bidding for land, resulting in stable LBC rates for non-landed residential properties, according to Teck.

Despite the decrease in LBC rates for non-landed residential properties, it is not expected to lead to a spike in en bloc sales. On the other hand, LBC rates for landed residential properties have increased by an average of 2.8%, compared to the 7.8% increase in March. Over 97% of the 118 geographical sectors have seen a rise in LBC rates, with the remaining three sectors remaining unchanged. Teck attributes this increase to an uptick in landed transactions and high-value deals in the Good Class Bungalow (GCB) market. A notable example is the sale of an uncompleted GCB in Tanglin Hill for $93.3 million.

For the commercial group, LBC rates have increased by an average of 1.5%, a smaller increase than the 3.8% in March. However, around 44% of the 118 sectors have seen a rise in LBC rates of 3% to 5%, with the remaining 66 sectors remaining unchanged. Teck notes that there has been a slight increase in interest in this segment, with the sale of various assets linked to a money laundering case. Among the high-value deals are the sale of Paragon REIT’s The Rail Mall, a three-storey shophouse at 182 Telok Ayer Street, and strata-titled units at the prestigious commercial development Solitaire on Cecil in the CBD.

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JLL’s Chua expects the predicted decrease in US interest rates to improve the investment market in Asia. In recent months, several commercial buildings have been sold, including 30 Prinsep Street by Income Insurance, Mapletree Anson by Mapletree Pan Asia Commercial Trust, and 20 Harbour Drive by Mapletree Investments.

In conclusion, Chua remarks that the chief valuer’s average 1.5% increase in LBC rates is not surprising. However, developers are expected to continue to be cautious in bidding for land, leading to stable LBC rates for non-landed residential properties.