Property charge hike not meant to cool collective sale fever: Mah

Minister says overall impact of higher DC is likely to be minimal

By Maria Almenoar

ST PHOTOS: LIM SIN THAI & ALPHONSUS CHERN THE Government's recent move to raise development charges (DC) was not a reaction to the current collective sale fever, the Minister for National Development, Mr Mah Bow Tan, explained yesterday. Rather, the move is because the 'property market is now booming' and it is 'timely to return' to the position before 1985 when the market went down and a recession ensued, said the minister. Though the move could affect some collective sale developments, Mr Mah said the overall impact is likely to be minimal. In a surprise move last Wednesday, the Government raised the tax it levies on property redevelopment - from 50 per cent to 70 per cent of the rise in land value - similar to what it was in 1985. This DC is payable only if the developer is building a bigger project on the land. Some market observers have said the move has abruptly cooled a sizzling market, especially for collective sales, and shifted market sentiment - although the government agency in charge has said that this was not the intention. RELATED LINKS   National Development Minister Mah Bow Tan on... There were also worries - especially among those hoping to sell their properties en bloc - that the DC hike might just be the first of more such cooling measures from the Government. Market watchers spoke of expecting 'a second whammy' on Sept 1 when the Government is expected to announce higher DC rates under its regular six-monthly review of the charges. Analysts said last Wednesday's DC hike had already made some developments more attractive and others less so - depending on how high their DC component was. Most of those affected would be 99-year leasehold properties outside prime areas such as the slew of privatised HUDC estates trying for a collective sale. For these sites, the DC hike could add 6 per cent or more to the land cost, so developers would be inclined to offer less in a collective sale after taking into account the increased expenditure. Mr Mah yesterday described the new DC rates as a 'a sharing of the gains and of the increase in value of the land as a result of the Government's planning approval'. Some of the increase in revenue will be used to provide infrastructure such as roads, rail and power. 'When you increase the plot ratio, when you build more flats, when you build to a higher level, you need to provide the infrastructure,' he said. Mr Mah was speaking to reporters after an event for at-risk youth organised by the north-east mosque cluster in Tampines. He also assured the public that the Government was closely monitoring the property market and the balance between supply and demand. If supply falls short, it will step up its land sales programme. He said: 'My assessment is, over the next two to three years, there will be ample supply coming into the market in various categories...But in the short term, within the one year or so, there may be an imbalance in supply-demand and some pressure on prices.' On rising rental rates, Mr Mah said there had been reports of reasonable prices still being asked in good areas. The high prices, he said, were generally due to people focusing on particular properties. He emphasised there were enough flats available for purchase or rental. Of the roughly 800,000 Housing Board flats, about 600,000 are eligible for rental under HDB rules. Mr Mah said all parties - developers, analysts and the Government alike - need to make information about the market available to the general public. mariaa@sph.com.sg