Land charge revisions reveal property market weaknesses, expert says

The government revised the LBC rates for four use groups.

The recent revisions in the land betterment charges (LBC) reflect the “underlying weaknesses” in the Singapore property market, according to JLL.

JLL’s view is supported by Huttons which said that “the land sales market was relatively subdued in the past six months due to the high interest rate, high construction costs and modest take-up at launches.”

Under the revised charges, rates for Group B2 or non-landed declined by 5.4% on average, which Huttons said was due to subdued land bids.

Meanwhile, JLL does not expect the changes to adversely impact the overall market activities.

“The impact of the LBC revision on the market would be less significant in the short to immediate term”, said Tan Hong Boon, executive director, of Capital Markets, JLL.

What would likely “lift the fog of uncertainty clouding the investment markets in and around Asia,” according to JLL is the expected US rate cut in September.

If such happens, Huttons said borrowing rates in Singapore will trend downwards.

“The impact of a lower borrowing rate will manifest more in the amount of loan a buyer can qualify for. For buyers with a combined monthly income of $16,000 and loan tenure of 30 years, they can borrow up to $1.7m. If the stress test interest rate is lowered by 50 basis points, their loan quantum will increase by $100,000 to $1.8m,” Huttons said,

“Buyers who are waiting on the sidelines may enter the market. With stronger demand, prices may also increase in tandem. If the sales take-up at launches improves, developers may need to replenish their land bank earlier. Nevertheless, developers are expected to be cautious in bidding for land, thus LBC rates for Group B2 are estimated to stay stable moving forward,” Huttons added.

JLL, for its part, said there will be strong investor interest going forward following rate cuts., which will likely result in upside revisions at the next LBC rates review,