_Knight Frank Commentary (Land Betterment Charge Rates from 1 March 2025)

Use Group A (Commercial)

Commercial Land Betterment Charge (LBC) rates increased by a mild 0.6% across the board, reflecting increments in 22 out of 118 sectors, against the 1.5% increase six months ago. The increases in most of these 22 sectors ranged from 2% to 6%, mostly in the Orchard Road, Stamford Road and River Valley areas.

These are likely due to increases in the prices of some of the strata commercial properties in City Hall/Bugis areas as well as in Orchard Road. Additionally, sales activity in the Rochor Planning Area picked up due to the new sales launch of One Sophia in November 2024. With the limited supply of new strata office spaces of palatable sizes in central locations, small business owners and non-institutional investors remained on the lookout for such boutique and smaller office spaces with more affordable ticket-sizes, for a variety of purposes that range from owner-occupation, for recurring income, capital preservation and capital appreciation. VisionCrest in the Orchard Road area, 108 Robinson Road in the CBD, and One Sophia in the Rochor area continue to provide opportunities for such buyers of strata commercial units in the year ahead.

Use Group B1 (Residential, Landed)

The average land betterment charge rates for landed residential (Use Group B1) rose by 2.9% across all 118 geographical sectors.

The URA Price Index for landed homes decreased by 1.6% in the nine months from end-March to end-December 2024. And given that there was no increase in the landed price index in Q4 2024, the islandwide increase in LBC landed residential rates is surprising. Landed home prices have not really increased in recent months, and one might wonder why the government would want to increase the LBC rates for this use group when the government’s own rationale for imposing the spate of cooling measures from December 2021 to April 2023 was meant to keep housing prices in check. Surely, it would not be the intention of the authorities to unnecessarily contribute to housing price increases, even if it were to be in a less direct fashion?

Use Group B2 (Residential, Non-Landed)

In the non-landed residential Use Group B2, the overall average was broadly flat with an increase of just 0.3%, with nine geographical sectors showing increments.
In much of 2024, developers were more cautious when submitting bids at government land tenders and this has calmed the growth in development land prices in general. At the same time, the collective sales market remains quiet with only a few enbloc projects successful, such as River Valley Apartments. The main hurdle to successful collective sales in the current market remains the gulf between sellers’ price expectation and developers’ risk appetites.

Use Group C (Hotel/Hospital)

There were increases in LBC rates in 13 sectors contributing an overall average gain of 0.6% in the hotel Use Group C.

There is investor interest from both institutional and private wealth in the living sectors that include hospitality. This is due to the steadily increasing number of tourist arrivals to Singapore back to pre-pandemic levels, accompanied by more meetings, incentives, conventions and exhibitions (MICE) events alongside entertainment events by international acts.

Use Group E (Place of worship, community building, etc)

The LBC rates for Use Group E (Place of Worship / Civic and Community Institution) have increased by 5.8% on average, affecting all sectors.

This is the first time since September 2014 (more than ten years), since any adjustment was made for this use group. Again, in a time when costs have increased across the board in all facets of the economy and daily life, was there a need to contribute further tax increases, especially for non-profit usage?