Property market to remain sluggish<\/p>\n
JAKARTA (JP): The property market would remain sluggish until
\n1999 as a decrease in demand for space from local companies would
\ncontinue, a leading property consultancy firm said yesterday.<\/p>\n
PT Procon Indah, in association with Jones Lang Wooton,
\npredicted in its January property outlook that demand in all
\nsectors would sharply decline throughout the country, except for
\nsome tourist destinations like Bali where the weak rupiah was
\nexpected to increase the flow of foreign tourists and boost the
\nisland's retail and hotel sectors.<\/p>\n
The company said the property marker was severely impacted by
\nthe economic crisis, in addition to the regional currency
\nvolatility, continued burden of private sector foreign
\ndenominated debt, lack of decisive action by the government and
\nrising social and political tensions approaching the presidential
\nelection in March.<\/p>\n
\"The rampant volatility (of the rupiah) and absence of a clear
\ngovernment policy makes economic, and therefore property market
\nforecasting extremely problematical,\" senior technical advisor to
\nProcon Indah and director of Jones Lang Wooton Asia Phil Simpson
\nsaid at the launching of the company's property market report.<\/p>\n
Company research department head Bayu Utomo said office space
\ndemand in Jakarta's central business district had experienced a
\nrecord high of 337,360 square meters in 1997, but demand was
\nexpected to decline 50 percent this year and would further
\ndecline 15 percent in 1999.<\/p>\n
\"All sectors will experience a significant slowdown in
\nbusiness. Insurance, oil and mining and telecommunications
\nsectors are expected to continue as the main demand generators,\"
\nhe said.<\/p>\n
Multinationals would prefer to wait until volatility in the
\ncurrency decreases and to watch the performance of the Indonesian
\neconomy before making any adjustments, Bayu said.<\/p>\n
Company retail department head Jeffrey Hong said the Jakarta
\nrental market had experienced a slowdown in 1997 when annual
\ntake-up was 109,586 square meters, or 34 percent lower than take-
\nup in 1996.<\/p>\n
Hong said demand for retail space in Jakarta was expected to
\ndecline at least 10 percent to 15 percent.<\/p>\n
The demand for retail space is predicted to continue to
\ndecline over the next two or three years, as retailers postpone
\nexpansion plans and some retail businesses go bankrupt.<\/p>\n
\"We project the average occupancy rate to drop to 78 percent
\nby 2000 from the current level of 91 percent, with 1998 being the
\nmost difficult year for this sector,\" Hong said.<\/p>\n
Bayu said property owners would try to keep their customers by
\noffering discounted prices, but clients would press for rupiah-
\ndenominated transactions to prevent losses amid the monetary
\ncrisis.<\/p>\n
He forecast that average office rent in the Jakarta central
\nbusiness district would decline by about 15 percent in 1998 and a
\nfurther 10 percent in 1999 from the current level of US$13.30 per
\nsquare meter per month.<\/p>\n
\"Pressure from end-users for rupiah-denominated transactions
\nare high, as most generate their income in rupiah. Developers and
\nowners have high levels of foreign-denominated debt, making
\nacceptance of a change in rent revenue extremely perilous to
\ncorporate survival,\" Bayu said.<\/p>\n
Company technical advisor Ian David said many debt-ridden
\nproperty owners now offered their properties to foreign investors
\nand local rich people as they were anxiously searching for cash
\nto service their debt.<\/p>\n
\"Foreign investment institutions from North America, Europe
\nand the Middle East, and cash-rich local players are seriously
\nlooking at investment opportunities, but are unlikely to act
\nuntil the government implements acceptable policies and actions
\nto restore confidence and stabilize the currency,\" David said.<\/p>\n
He also said foreign investors were still reluctant to make
\npurchases because property owners still maintained an
\nunrealistically high property value.<\/p>\n
David predicted foreign investors would renew their efforts to
\nenter the country's property market late this year, which he
\nexpected to be a good starting point for the industry's recovery.
\n(jsk)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/property-market-to-remain-sluggish-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}