Land Betterment Charge for non-landed residential cut by 5.4% on average, sharpest drop in over five years

Land Betterment Charge (LBC) rates for non-landed residential use have been reduced by an average of 5.4%, marking the largest decline in over five years.

In a statement released on Friday evening (30 August), the Singapore Land Authority (SLA) announced that the LBC rates for non-landed residential use for the upcoming six months have decreased by an average of 5.4%, reversing the 0.1% increase seen six months prior. This is also the steepest average reduction since March 2019.

Among the 118 sectors, 116 saw rate cuts ranging between 2% and 16%, while the remaining two sectors stayed unchanged.

Analysts: Developers Stand to Benefit from the Latest Revision

The Land Betterment Charge is paid by developers to the State for the right to enhance the use or density of a site, reflecting developers' underlying demand for land. Reviewed bi-annually, the rates are determined by SLA in consultation with the Chief Valuer.

This latest round of revised LBC rates takes effect from 1 September and will remain in place until 28 February next year.

The downward revision for non-landed residential land comes on the back of more conservative bids submitted in recent Government Land Sales (GLS) tenders. While developers stand to benefit from this adjustment, it may not necessarily spur more collective sales (en bloc) activity, as asking prices for en bloc sites remain elevated.

Property cooling measures, elevated interest rates, and heightened global geopolitical risks have all tempered developers' appetite for land acquisition.

Overall islandwide land values are estimated to have slipped by an average of 13%, weighed down primarily by cautious GLS tender bids across sectors such as Holland Road, Dunearn Road, Sixth Avenue, West Coast Road, Jurong East, Sembawang, Mandai, and Woodlands.

With the US Federal Reserve anticipated to embark on rate cuts, local mortgage rates are expected to follow suit, potentially drawing buyers back into the property market.

Should market demand pick up, home prices could rise in tandem. If primary sales across new private home launches improve, developers may find the need to replenish their land banks. Nonetheless, developers are expected to remain disciplined in their bidding, meaning future LBC rates for non-landed residential land are likely to stay relatively stable.

LBC Rates for Other Use Groups Raised or Kept Unchanged

Non-landed residential was the only sector to register a reduction in average LBC rates; all other use groups were either raised or kept unchanged.

Rates for landed residential use climbed by an average of 2.8%, with 115 out of 118 sectors logging increases of around 3%, while the remaining three sectors remained flat.

The increase in landed residential LBC rates was underpinned by higher transaction volumes and firmer pricing for Good Class Bungalows (GCBs). The most prominent deal was an uncompleted GCB along Tanglin Hill, which changed hands for $93.3 million.

Commercial, as well as hotel and hospital use groups, saw average LBC increases of 1.5% and 0.6% respectively.

LBC rates for industrial, place of worship/civic and community institution, and other use groups remained unchanged.