DO DEVELOPMENT CHARGE RATES REFLECT MARKET VALUE : ANALYSIS OF RESIDENTIAL LAND PRICES AND TRENDS

Abstract

Land value can determine the success of a development as it is usually the largest cost component of the total cost. Any changes in the land use and intensity will have a significant impact on the land value. Before benefiting from the changes in land use planning, development charge which is a form of tax to recoup the enhancement in land value will be levied upon approval. Currently, the development charge is levied based on 50 percent of the increment in land value arising from the grant of planning permission in excess of the Master Plan which can be based on either the development charge table or case-by-case valuation. The certainty and simplicity of the development charge table makes this option more popular and superior even though the development charge rates might not truly reflect the changing value as it is revised half-yearly. Any variations between the development charge rates and the land value will have an adverse impact on the property market. This study aims to test the correlation between the development charge rates and the property price indices and examine the relationship between the development charge rates and actual land price for use group B1 and B2 since 1 September 2000. The findings show that the movement of the development charge rates does not truly reflect the property market conditions and the development charge rates do not reflect 50 percent of the land value.