2024: What is Land Betterment Charges and Why it concern YOU if you are buying a Property!
Introduced in 2022, the Land Betterment Charge (LBC) is a tax levied on windfalls arising from increases in land value when development takes place. Additionally, LBC rates are reviewed twice a year by the Singapore Land Authority (SLA), with adjustments made based on location and property type.
Just recently, SLA announced the latest update in LBC rates for residential and non-residential properties, effective from 1 Mar to 31 Aug 2024.
For non-landed housing, LBC rates rose by 0.1% on average since Sept 2023. Districts seeing the biggest increase in LBC include Toa Payoh, Potong Pasir, Clementi, and West Coast. These 9% to 14% upticks come on the back of completed Government Land Sales (GLS) site tenders at Toa Payoh Lorong 1 and Clementi Avenue.
Source: ERA Research and Market Intelligence, ERA Capital Market and Investment Sales
Consequently, these LBC increases could end up further cooling the Collective Sales market within the aforementioned areas. This is due to the increase in development cost for private land purchased en bloc by developers.
In contrast, non-residential property LBC rates in the Core Central Region fell by 11% to 19% since Sep 2023, registering the largest decrease amongst the various sectors.
Such downticks can be attributed to dampened demand from last year's Additional Buyer's Stamp Duty rate hikes on property purchases made by foreigners (from 30% to 60%) and local investors (30% ABSD for citizens purchasing their third and subsequent properties).
Source: ERA Research and Market Intelligence, ERA Capital Market and Investment Sales
On the other hand, the average LBC rate for landed homes had grown by 7.8% since Sep 2023, with 116 out of 118 sectors witnessing increases of between 7.5% to 8.4%. This outcome can be traced back to escalating landed home prices amidst limited supply.
As a result of these market conditions, developer interest in purchasing landed development sites could stay dampened, particularly for sites suited for multi-unit projects. That said, landed property prices are still expected to continue increasing this year, albeit at a more moderate pace.
Disclaimer
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