Cancellation of property projects may continue<\/p>\n
JAKARTA (JP): Tough times will continue to shade the property
\nsector in the capital for the next 18 months due to the currency
\nupheaval, with more postponed or canceled projects and less
\ndemand, according to a property consultant firm.<\/p>\n
Colliers Jardine's head of research Evelyn Khoo said yesterday
\nthe suspension of projects would increase over the next 12
\nmonths, particularly large-scale, mixed-used developments, as
\nmore developers were expected to feel the pinch of the ongoing
\nmonetary turmoil.<\/p>\n
\"Demand in most sectors will drop by about 20 percent to 30
\npercent after the slowdown in the country's economy,\" she said.<\/p>\n
However, she said Indonesia's property sector remained
\nattractive to foreign investors.<\/p>\n
\"There's no indication Indonesia is about to see a property
\ncrash where property prices and demand usually drop by more than
\n40 percent,\" she said.<\/p>\n
A price correction was expected over the next 12 months with
\nrental and capital values adjusting to realistic levels while a
\nrise in vacancies was inevitable, she added.<\/p>\n
Creative marketing tools such as attractive financial
\npackages, lower exchange rates for U.S. dollar payments and
\nrupiah price lists would be prevalent in the market for the next
\nyear, she added.<\/p>\n
In terms of project funding, \"sources will expect to see high
\nlevels of security before granting loans for project
\ndevelopments, particularly large-scale developments,\" Khoo said.<\/p>\n
The monetary crisis in Asia has also hit Indonesia. The value
\nof the U.S. dollar has risen by more than 80 percent against the
\nrupiah since July.<\/p>\n
Multiple plunges<\/p>\n
Khoo said the crisis' shock had a crippling effect on interest
\nrates, inflation and gross domestic product growth and the
\nproperty market.<\/p>\n
She said that 34 percent of some 1.85 million square meters of
\noffice space that would be supplied between 1998 and 2000 was
\neither delayed or canceled in October.<\/p>\n
\"Total supply will increase to 3.77 million square meters by
\nthe end of this year, an increase of 15.7 percent over the past
\n12 months.<\/p>\n
\"Although potential supply is high with 1.85 million square
\nmeters expected to be completed for the 1998\/2000 period, the
\nnumber of projects expected to be rescheduled for a later date
\nwill increase,\" she said.<\/p>\n
Demand in the leasing sector in 1997 was still strong with
\nvacancies at 9.6 percent, she added.<\/p>\n
\"However, demand in 1998 is to drop by 25 percent to 30
\npercent due to a slowdown in the banking, financial,
\nconstruction, transport and service industries.<\/p>\n
\"Average rentals have declined by about 5 percent to 10
\npercent since October and could decline by a further 5 percent to
\n10 percent over the next 12 months, although prime buildings will
\nbe less affected.\"<\/p>\n
The excessive depreciation of the rupiah and high interest
\nrates have also affected the retail sector, she said.<\/p>\n
The current 95 percent occupancy rate would drop to 85 percent
\nby the end of next year, she added<\/p>\n
\"The potential supply for the next three years is 692,829
\nsquare meters with 534,766 square meters, or 77 percent of future
\nstock, at various stages of construction.<\/p>\n
\"As much as 34 percent of the projected supply has been
\ndelayed or halted as of the end of October. However, this figure
\nis expected to increase as the full impact of the market
\nsentiment is to be felt,\" she said.<\/p>\n
In the hotel sector, Khoo said that tourist arrivals were not
\nlikely to improve over the next year.<\/p>\n
\"There is currently a surplus of rooms, with another 9,728
\nstar-rated hotel rooms in Jakarta expected to enter the market
\nbetween 1998 and 2000, if all proposed projects continue,\" she
\nsaid.<\/p>\n
But three five-star hotels -- Danamon Sheraton, Marriott and
\nANA Hotel totaling 1,377 rooms -- had been delayed as of October,
\nshe added.<\/p>\n
According to Khoo, prices of industrial land have remained
\nrelatively stable despite the sharp depreciation of the
\nrupiah.<\/p>\n
However, prices are expected to decrease by 5 percent to 10
\npercent by the middle of next year due to an expected drop in
\ndemand and then improve toward the end of 1999 as the market
\nregains confidence.<\/p>\n
The apartment sector had also been gloomy. As of October,
\nabout 10 percent of the future apartment supply had been put on
\nhold in light of the economic crisis, she said.<\/p>\n
\"A further 15.8 percent of projects currently under
\nconstruction had been suspended due to the lack of funds or
\ncontract negotiations,\" she said.<\/p>\n
More apartment projects will be delayed or canceled over the
\nnext 12 months, therefore Colliers Jardine had revised its supply
\nprediction to 23,991 apartments from 27,227 for the 1998\/2000
\nperiod.<\/p>\n
The company predicted that rental costs would decrease by
\nbetween 8 percent and 10 percent within the next year. (icn)<\/p>",
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"sponsor": "Okusi Associates",
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