Rise in land development charge will allow fair sharing of property gains

MBT "Rise in land development charge will allow fair sharing of property gains "

22 July 2007 2106 hrs
SINGAPORE : The primary intention of the land development charge increase is not to slow down the frenzied property market.
National Development Minister Mah Bow Tan says the aim is to facilitate a fair sharing of the enhancement in the value of the land.
Last Wednesday, the government announced an increase in the land development charge from 50 to 70 per cent.
Experts were split, with some saying it would slow down the en bloc sales frenzy as developers would have to fork out more for land.
This would in turn stem rising rental costs as fewer redevelopments mean fewer apartments torn down.
But others said the bullish market sentiments would override that.
Weighing in, the National Development Minister says the impact on en bloc sales will be minimal and underlines the rationale behind the charge.
He says: "The development charge is to take some of that increase in value to go and improve the infrastructure. Roads, rail, power, whatever. Because you know when you increase the plot ratio - build more flats, build to a higher level - you need to provide the infrastructure. So that's what the development charge is. You could say it's a tax on the increase in the value as a result of government action."
So depending on the stipulated land use, some projects may not be affected.
Mr Mah says: "When you look at the different en bloc sales you'll realise that some en bloc sales actually do not incur development charge at all, partly because they are actually able already to develop up to a higher intensity. So, the government doesn't have to go in and change the planning parameters."
He notes that a recession in 1985 led to the downward revision of the land development charge.
But now that the property market has more than recovered, it is time to reinstate things.
Mr Mah says: "It's what we feel to be a fair share of the enhancement of the value of the land. So that's why during this time, the market is healthy, we decided it's timely for us to go back to the original."
He says the current squeeze will only last a short while as he expects ample supply to come in over the next 2 or 3 years in various categories.
And to further ensure smooth functioning of the market, there should be comprehensive information sharing by analysts and developers.
He says: "This is not just government coming out with such information. I think developers and analysts should also make it a point when they put out information that they should put it out based on facts, not based on speculation. And if they do publish information based on their own analysis of the situation, I think it's important for them to upfront say so, so that people know."
"It's not just the government agencies putting out information. It's very important to make sure that you keep publishing out this information so everybody knows, so they don't get spooked, panicked by one particular headline, one report in the papers about record prices here or record rentals there."
In all, Mr Mah says the property market will continue to be monitored with sustainable growth in mind, and more land will be released through the government land sales programme if necessary
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