Rates, tax and credit affect property market<\/p>\n
JAKARTA (JP): Increasing interest rates, the imposition of a
\nluxury tax on property sales and the government's call for
\nlimited credit expansion will affect the property market this
\nyear, a property consultant said.<\/p>\n
Craig Williams, a director at the international property
\nconsultant company Jones Lang Wootton Asia, told journalists
\nyesterday that the sector most hit would be the residential
\nmarket.<\/p>\n
\"If you see interest rates are increasing, that would put
\ndefinite burdens on a particular market, especially the
\nresidential market, as people rely on loans to finance a portion
\nof the purchase price of a residence,\" Williams noted.<\/p>\n
Since November, when the U.S. Federal Reserve raised interest
\nrates, domestic interest rates have increased by one to two
\npercent.<\/p>\n
Economist Mari Pangestu predicted that domestic interest rates
\nwill increase by at least two percent and at most by four percent
\nuntil the third quarter of this year.<\/p>\n
Williams said that, besides the high interest rates, the
\nintroduction of a luxury tax on property sales, beginning this
\nmonth, and the government's policy to limit the growth of bank
\nlending to 19 percent this year will cause the property market to
\ngo sluggish.<\/p>\n
\"The introduction of a luxury tax would be an additional
\nburden for people buying residential property,\" Williams said.
\n\"If we see credits tightened for the next few months, it will
\ndefinitely affect the market.\"<\/p>\n
Williams said that the property market has shown to be
\nresilient to market factors and \"bounced back very quickly as
\nthere is very good demand in all property sectors.\"<\/p>\n
He forecasts that last year's high record of the government's
\napproval on foreign and domestic investments as well as this
\nyear's projected high economic growth will serve as stabilizing
\nfactors for the property business.<\/p>\n
He said the property market in the greater Jakarta area
\ngenerally demonstrated strong supply and demands levels
\nthroughout last year.<\/p>\n
Growth<\/p>\n
According to the newest edition of Property Market Outlook, a
\nquarterly magazine published by PT Procon Indah in association
\nwith Jones Lang Wootton, all property sectors enjoyed significant
\ngrowth last year, except luxury apartment and hotel sectors.<\/p>\n
The hotel market demonstrated declining overall occupancy
\nlevels. During the first eight months of last year, the average
\nhotel occupancy level declined to 60 percent from 64 percent in
\nthe same period of 1993.<\/p>\n
It is estimated the occupancy level is likely to fall further
\nin 1995 due to the faster growth in supply, especially in hotels
\nof three stars and lower, than the demand.<\/p>\n
\"Hotels which do not have a strong affiliation or strong
\nrepeat clientele will suffer first,\" the publication says.<\/p>\n
It also says that over 970 new apartments and condominiums for
\nlease entered the market last year, reducing overall occupancy by
\n12.8 percent to 78.4 percent by last December.<\/p>\n
In the second half of 1994, several condominium projects were
\nrescheduled. Approximately 6,600 units are in the active
\nconstruction stage, and scheduled for completion by the end of
\n1997. An additional 18,780 condominiums are projected to be
\ncompleted in the same period and enter the market.<\/p>\n
\"The high supply of upper income targeted condominiums has
\ngiven rise to concern as there are a limited number of buyers and
\nmany are purchasing for speculation,\" the magazine says.<\/p>\n
While the condominium and hotel market saw weak demand last
\nyear, the industrial, retail and office sectors enjoyed their
\nbullish growth.<\/p>\n
Bayu Utomo of Procon Indah said the investment deregulation
\nissued in June last year has affected the industrial market
\npositively. Annual take-up during 1994 increased by 25 percent
\nover the previous year's level to 280 hectares.<\/p>\n
The June deregulation eases requirements on equity ownership
\nand divestment and allows foreigners to invest and operate in
\ninfrastructure facilities.<\/p>\n
\"The positive impact of the deregulation on the industrial
\nmarket is expected to continue in the following years,\" Bayu
\nsaid.<\/p>\n
Last year, the office sector enjoyed its highest average
\noccupancy rate since December 1991. The occupancy rate last year
\nincreased by 5.3 percentage points to 92.2 percent from the
\nprevious year.<\/p>\n
The magazine anticipates that demand for office space will
\nremain strong this year and next year.<\/p>\n
The retail market enjoyed better prices last year, with an
\nincrease in average rents of prime ground floor space of over six
\npercent to US$70 per square meter per month. The average
\noccupancy rate of retail centers for the second half of 1994
\nincreased by 4.5 points to 92.1 percent last December. (rid)<\/p>",
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