DEVELOPMENT CHARGE AND THE IMPLIED VALUE OF LAND

Abstract

Development charge (DC), imposed on developments that require planning permission above the existing permitted use and intensity, is deemed to give rise to an implied value of land. This study is a pioneer attempt to observe the congruency of DC rates with market values of different periods and to examine the disparity in DC rates of neighbouring land. Findings through a correlation analysis to examine the congruency of DC rates (of nonlanded residential, Use Group B2) with market values show that DC rates are highly correlated with current market values, and less correlated with future market values. Considerable differences in the implied land value of neighbouring land are only reflected by a minority of sectors. However, the differences can be substantial, with sectors having values once or twice greater than their neighbouring sectors. Such differences in implied land value are not supported by differences in selling prices of built-up properties. Differences in selling prices of both condominiums and private apartments showed consistently lower percentage differences than those shown in implied land values. These findings suggest that while DC rates are congruent with current market conditions, the rates may not truly reflect the actual land value, thus calling for a review of rates or possibly a finer delineation of land such that each sector may be more homogenous to better reflect the value of land.