Monday, March 14, 2011

Pine Grove's DC is almost $500 million....!

And speaking of Development Charge (DC), a report in the TODAY newspaper today has revealed another possible stumbling block to the Pine Grove collective sale process.

The high development charge (DC) of nearly half a billion Singapore dollars for Pine Grove, which has been put up for enbloc sale recently, may be a turn-off and a potential deal breaker for some property developers.

Property analysts said that the site’s DC is about 9.5% higher at $460 million, in line with the rate hikes announced earlier this month.

Including the DC, analysts said Pine Grove’s total cost to a potential buyer works out to about $2.2 billion or $1,152psf ppr.

Pine Grove is just one of the enbloc properties affected by a higher DC rate.

And residents at enbloc properties may have to accept a lower reserve price to balance out the higher DC charge just to retain the attractiveness of the property’s total costs, said analysts.

The rise in DC will also eat into the seller’s profit margins – a trend that has been unfolding for the last four years.

“Previously, we were looking at as high a profit margin of 50 to 100% but now, if you get a margin of 15 to 30%, I think you’re considered quite lucky”, said Ms Christina Sim, director of investment at Cushman & Wakefield.

Analysts say the DC’s rate of increase depends on the transacted prices in the particular area over the last six months.

In areas like Upper Serangoon Road and Punggol, DC for non-landed properties has increased by 17%.

Non-landed properties in prime areas like Holland Road, Sixth Avenue and Farrer Road have risen by 25%.

Properties with no DC should benefit both developers and residents, analysts said.

For instance, Novena condominium Grand Tower, which has also been put up for collective sale, will seem more attractive to developers. This is because it is much smaller compared to Pine Grove and is selling for $92 million with no DC.

Each owner of the 28 units should receive a tidy $3.28 million from the sale.

Call us wet blankets if you must, but the wife and I are certainly not holding our breaths on the Pine Grove enbloc...



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