Fri, 07 Nov 2008
The property business in Jakarta and surrounding areas is heading for a slowdown next year due to increases in interest rates, inflation, prices of materials and rental costs, according to a property consulting company.

"The impacts of the global economic crisis will likely affect the domestic property sector and indications of a slowdown in supply and demand in Jakarta and its surrounding areas have already been noted since October," said head of marketing and communications at PT Procon Indah, Dini Priadi, on Tuesday.

On the supply side, she said, high interest rates, inflation and prices of materials had discouraged developers from continuing their projects.

Hendra Hartono, Procon chief business development executive, said only developers that mobilized financial resources on pre-sale payments and cash flows or on strong commitments from would-be tenants would continue their projects.

Dini said that the public's low purchasing power in the country, affected by high interest rates, slower economic growth and high inflation, would hurt the sector on the demand side next year.

Key Bank Indonesia interest rate currently stands at 9.5 percent, with accumulative inflation already hitting double digits in the first ten months of the year.

Meanwhile, Indonesia's economic growth target has also been adjusted in response to the global economic downturn. The government's revised 2008 state budget lowered the assumption on targeted growth for this year end to 6.46 percent, from the previous 6.8 percent.

Next year, the economy is earmarked in the 2009 state budget to grow by 6 percent.

The high interest rate, for example, has pushed the mortgage rate up to 17 percent, which will not be so attractive for potential buyers, according to Procon in its third quarterly Jakarta property market review and 2009 outlook.

The report says the rupiah's depreciation against the U.S. dollar also pushed up construction costs, which will affect the new supply of properties.

Meanwhile, the rupiah's depreciation has also boosted the cost of U.S. dollar-denominated property rentals, which will affect occupation rates of properties.

The value of the rupiah depreciated from Rp 9,330 against the dollar on Sept. 24 to Rp 10,850 by Tuesday.

While the outlook is a bit gloomy in the coming year, the property sector did fairly well in this year's third quarter, the report shows.

It says cumulative supply of office space at Jakarta's central business district (CBD) rose to 3.81 million square meters as of September from 3.63 million square meters as of June, while the cumulative demand increased to 3.29 million square meters from 3.21 million square meters.

The cumulative supply of rental apartments increased to 35,000 units from 34,460 units and the cumulative demand to 25,200 units from 24,000 units. (dis)



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