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Take-up rate hits new low in 1Q08. While developers continue to cut
back on their launches in 1Q08, the lower number of units launched still
could not be absorbed by the market, as the take-up rate for new launches
has plunged sharply from 82.9% in 4Q07 to 54.4% in 1Q08, the lowest
since 2000. On a segmental basis, while take-up rates in the other two
regions had remained stable following sharp falls in the previous two
quarters, OCR saw the rate plunge from 91.8% in 4Q07 to 38.1% in 1Q08.
However, this may be due to the sharp 75.6% jump in new launches in
OCR in the quarter.
6000 220.0
5000 200.0
4000 180.0
3000 160.0
2000 140.0
1000 120.0
0 100.0
1Q
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1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 20072008
Source: URA
Take-up rate hits new low since 2000. The take-up rate for new launches
plunged sharply from 82.9% in 4Q07 to 54.4% in 1Q08 (Chart 2), the lowest
since 2000. While developers continued to cut back on their launches in
1Q08, the lower number of units launched still could not be absorbed by
the market. A further breakdown of the take-up rate according to different
regions showed that the weakness in 1Q08 was in the Outside Central
Region (OCR), while take-up rates in the other 2 regions had remained
stable following sharp declines in the previous few quarters. .
5,000.0 120.0%
4,500.0
100.0%
4,000.0
3,500.0 80.0%
Launches
3,000.0
Take-up r5ate
2,500.0 60.0%
2,000.0
1,500.0 40.0%
1,000.0 20.0%
500.0
0.0 0.0%
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2000 2001 2002 2003 2004 2005 2006 20072008
160%
140%
120%
Take-up rate
100%
80%
60%
40%
20%
0%
4Q 1Q 2Q 3Q 4Q 1Q
2007 2008
Interest for mass market properties should come back. One reason
for the plunge in OCR take-up rate from 91.8% in 4Q07 to 38.1% in 1Q08
could be due to concerns of oversupply in the mass market properties
segment, brought on by the sharp 75.6% jump in new launches in this
segment in the quarter. Otherwise, we note that the take-up rate in OCR
has been fairly resilient over the past two quarters. And given that only five
projects with total of 1,139 units are expected to be launched in OCR
between 2Q08 and 3Q08, this should ease concerns of oversupply and
drive the take-up rate higher over the next few quarters.
Growth in rental rates could slow. The rental index has performed strongly
since the beginning of 2005, rising by 74.3% to date. This was on the back
of a declining vacancy rate that fell from 8.8% to 6.3% over the same
period and the key contributing factor to this decline was the flurry of enbloc
sale tenders that reduced the amount of available properties in the market.
However, the cooling down of the enbloc fever will see fewer properties
being taken out of the market, which together with an impending supply of
an estimated 59,540 units to be completed between 2008 and 2011, we
could see vacancy rate increasing over the next few years. And this would
lead to a more muted outlook for rental rates amidst a more uncertain
economic outlook.
10.00% 170
160
9.00%
150
8.00% 140
Vacancy Rate
Rental Index
130
7.00%
120
6.00% 110
100
5.00%
90
4.00% 80
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1994199519961997199819992000200120022003200420052006
Source: URA
Property prices could go down with rental rates. Historically, the rental
index and property price index have exhibited a strong correlation and the
recent strong performance of the Property Price Index (PPI) was well backed
by the run-up in the rental index Strong rental rates will attract more buyers
to invest in properties for the yield and thus driving property prices higher.
However, the more muted outlook for rental rates could be another catalyst
to dampen property prices going forward.
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80
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1994 1995 19961997 1998 1999 2000 2001 20022003 2004 2005 2006 2007
2008
Source: URA
220
200
100
80
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
Source: URA
Footnote: CCR – Core Central Region, RCR – Rest of Central Region, OCR – Outside Central Region
Capitaland
Jalan Mutiara River Valley Road NA 10
Nassim Hill Tanglin Road NA 10
Tong Watt Road River Valley Road NA 9
Yio Chu Kang Road Yio Chu Kang Road NA 26
Cairnhill Road Orchard Road District NA 9
Keppel Land
The Tresor Duchess Road 62 10
Reflections at Keppel Bay Keppel Bay 1129 4
Crest @ Cairnhill Cairnhill Circle 15 9
Naga Court Bukit Timah Road 56 10
Marina Bay Suites Marina Bay 221 1
Keppel Bay Plot 3 Keppel Bay 307 4
Keppel Bay Plot 4 Keppel Bay 234 4
Keppel Bay Plot 6 Keppel Bay 94 4
UOL Group
Green Meadows Upper Thomson Road 400 20
Spottiswoode Park Spottiswoode Park Road 231 2
Simei St 4 Simei St 4 NA 18
SHAREHOLDING DECLARATION:
The analyst who wrote this report holds NIL shares in the above security.
Carmen Lee
Published by OCBC Investment Research Pte Ltd Head of Research