20% oversupply in apartments, office space<\/p>\n
JAKARTA (JP): The property market this year (1996) will see an
\noversupply of apartments and office spaces by about 20 percent,
\nchairman of Real Estate Indonesia -- the Indonesian developers
\nassociation -- Alexander Edwin Kawilarang said here over the
\nweekend.<\/p>\n
"Property developers should seriously consider this oversupply
\nin planning their investments," the REI chairman said at a year's
\nend meeting with the press.<\/p>\n
As many as 9,786 apartments entered the Jakarta property
\nmarket last year, causing an oversupply of 20 percent.<\/p>\n
Another 43,000 apartments will enter the market within the
\nnext two years, he said, suggesting that the apartment business
\nwill become more sluggish.<\/p>\n
The oversupply in apartments could press down the prices by 40
\npercent. "This downward trend could continue until it reached a
\nlow price that would encourage people to buy. Only then the will
\nprices recover," he said.<\/p>\n
According to Edwin, last year the oversupply in office spaces
\nreached 13 percent, as the demand totaled only 2.3 million square
\nmeters while the supply surged to about 2.7 million square
\nmeters.<\/p>\n
This year, there will be a new supply of about 400,000 square
\nmeters. "This will result in an oversupply of 20 percent," he
\nsaid.<\/p>\n
Already, the office rentals had been decreasing. In 1994, the
\nrentals averaged US$25 per square meter, down to an average $12
\nper square metre last year.<\/p>\n
He noted that the oversupply particularly hit the office
\nspaces on second-class area like those along TB. Simatupang outer
\nring road.<\/p>\n
Prime-site office spaces like those along M.H. Thamrin and
\nSudirman roads saw a much better business with an average 90
\npercent occupancy rate.<\/p>\n
Besides the oversupply, apartment builders will also likely
\nencounter management problems as most of them are new-comers to
\nthat business.<\/p>\n
Meanwhile, property analyst Panangian Simanungkalit recently
\nnoted that the sales of houses this year will drop by 40 percent
\ncompared to those of last year. "This is due to the high interest
\nrates and the increasingly healthy mechanism of the house
\nmarket," he said.<\/p>\n
He added that this year will see less speculative buyers and
\nthe house market will be dominated by end-users.<\/p>\n
"Property businessmen will find it increasingly difficult to
\nsell luxury houses, which are usually secondary houses for the
\nbuyers," he said.<\/p>\n
Banks, he noted, have already noticed the trend and they have
\nbecome selective in giving credits to developers, especially
\ndevelopers of the luxury houses.<\/p>\n
The REI general chairman agreed. "They should be particularly
\ncareful with the developers of middle-class and high-class
\nhousing," he noted.<\/p>\n
But he called on banks to increase their credits for low-cost
\nhouse development because the demand for this kind of houses is
\ngrowing.<\/p>\n
Different from low-cost houses, which are bought mostly by
\nend-users, the middle and high class houses are bought mainly by
\nspeculative buyers.<\/p>\n
According to Bank Indonesia, the central bank, until last
\nSeptember, credits for property development have exceeded Rp 41
\ntrillion (US$17.94 billion) or 17.2 percent of the total credits
\noutstanding. (13)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/20-oversupply-in-apartments-office-space-1447893297",
"image": ""
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"sponsor": "Okusi Associates",
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