Recovery trend continues amid increasing demand
\nRikza Abdullah
\nContributor
\nJakarta<\/p>\n
Jakarta's rental apartment market, severely hit by the
\neconomic crisis in 1997, continues its recovery amid a steady
\nincrease in new demand.<\/p>\n
The demand has grown steadily as more and more expatriates
\nprefer to live in apartments instead of houses, due to economic,
\nsecurity and personal safety concerns.<\/p>\n
However, as the surge in demand has not been accompanied by
\nany increase in new supply, owners have taken it as an
\nopportunity to raise rental rates, albeit the increase has not
\nbeen very significant.<\/p>\n
The director of strategic advice for property consulting
\ncompany PT Procon Indah, Lini Djafar, told The Jakarta Post early
\nlast week that the apartment market had become more competitive
\nin recent months due the absence of a new supply, both in rental
\napartments and strata-titled condominiums.<\/p>\n
The total supply of rental apartments at the end of June stood
\nat 5,982 units, of which 2,054 were serviced apartments and the
\nother 3,928 non-serviced ones. Meanwhile, the total supply of
\nstrata-titled condominiums reached 26,313 units, of which 8,717
\nunits were available for rental.<\/p>\n
Lini said the increase in demand had increased the occupancy
\nrate from 58.9 percent in the second quarter of 2001 to 60.8
\npercent (with a net take-up of 143 units) in the first quarter of
\n2002, and to 61.6 percent (with a net take-up of 125 units) in
\nthe second quarter. About 5,640 units were left unoccupied as of
\nthe end of June.<\/p>\n
The occupancy rate for leased apartments steadily declined,
\nfrom almost 90 percent in 1996 to slightly over 55 percent in
\nearly 2000, before rising later that year.<\/p>\n
Lini said the economic crisis, which began in the latter half
\nof 1997, had forced companies to terminate their hiring of
\nexpatriates, while many of those remaining in the country had to
\nsend members of their families back to their home countries.
\nExpatriates prefer to stay in apartments rather than rent large
\nhouses these days.<\/p>\n
Property consulting company Colliers Jardine Indonesia said in
\nits latest residential market overview that increasing concern
\nover personal safety and security had also encouraged expatriates
\nto lease apartments instead of houses.<\/p>\n
Expatriates with high incomes generally prefer to stay at
\nluxury rental apartments in Jakarta's central business district
\n-- located in Central and South Jakarta -- while those on lower
\nincomes generally stay at leased strata-titled condominiums,
\nmostly located in West and North Jakarta. Most of the expatriates
\nwork for companies operating in the oil and minerals mining,
\nairline and trading businesses, as well as embassies.<\/p>\n
The occupancy of strata-titled condominiums is dominated by
\ndomestic executives who have bought them for temporary occupation
\nor for investment.<\/p>\n
Before the economic crisis, the occupancy rate of strata-
\ntitled condominiums increased, reflecting a new trend for
\nIndonesians to own and live in apartments. A change in the
\nlifestyle of high-income Indonesians then discouraged investors
\nfrom building new rental apartments. They were also reluctant to
\nbuild rental apartments due to their lengthy return on
\ninvestment. However, during the economic crisis, sales of strata-
\ntitled condominiums declined and developers adjusted their
\nmarketing strategy by offering some of their condominiums to rent
\nto improve their cash flow.<\/p>\n
\"Strata-titled condominiums for lease are now dominating the
\nrental apartment market due to their competitive rental rates and
\nflexible leasing terms,\" Lini said, adding that because business
\nconfidence was low, developers tended to shorten their leasing
\nperiods to about six months to one year, as compared to two-year
\nor three-year terms previously.<\/p>\n
She said the average rental rate for serviced apartments
\nduring the second quarter of this year had increased by 6.8
\npercent in U.S. dollar terms over the same period in 2001, and
\nthe that for non-serviced apartments within the range 4.3 percent
\nto 7.1 percent. Meanwhile, the average rental rate for strata-
\ntitled condominiums -- whose rents were generally denominated in
\nrupiah -- increased in the range 11.8 percent to 21.6 percent in
\nU.S. dollar terms due mainly to appreciation in the value of the
\nrupiah.<\/p>\n
The monthly rental for serviced apartments was set at about
\n$18.50 per square meter during the second quarter of this year,
\nfor non-serviced apartments in prime areas about $14.50, non-
\nserviced apartments in secondary areas about $9.60, strata-titled
\ncondominiums in prime areas about $9.40 and strata-titled
\ncondominiums in secondary areas about $6.90.<\/p>\n
Procon Indah says, in its latest quarterly market review, that
\nthe overall leasing demand in the latter part of this year is
\nlikely to remain flat because business confidence in Indonesia is
\nstill weak, while the average rental rate may remain stagnant as
\nnew units are expected to enter the market by the end of the
\nyear.<\/p>\n
The Pondok Indah Golf Apartment Tower 2 in South Jakarta, for
\nexample, will increase the number of rental apartments by 100
\nunits later this year, while completion of the Four Seasons
\nRegent Residences Towers 3 and 4 in South Jakarta, Ambassador
\nApartment Tower 2 in South Jakarta, Pavilion Park Apartments
\nTowers 2 and 4 in Central Jakarta, as well as the Pantai Mutiara
\nCondominium in North Jakarta, may increase the number of strata-
\ntitled apartments by about 500 units.<\/p>\n
These figures indicate that the market share of rental
\napartments will decline further later this year as they will
\ncontinue to face strong competition from strata-titled
\ncondominiums offered for lease.<\/p>\n
Adhitya Wisesa, a research and consulting manager for Colliers
\nJardine, told the Post that the demand for rental apartments in
\nJakarta's prime areas was actually expected to increase slightly
\nin the second half of this year as more expatriates were likely
\nto come to Indonesia to do business.<\/p>\n
The number of expatriates working in Jakarta, which dropped
\nfrom about 40,000 before the economic crisis to about 10,000 in
\n1998, had increased to around 12,000 to 13,000 at present, he
\nsaid.<\/p>\n
\"But the expected additional demand will not force up rental
\nrates because the supply will also increase with the operation of
\nnew apartment buildings like the Four Seasons Regent Residences
\nTowers 3 and 4 and the Pondok Indah Golf Apartment Tower 2,\" he
\nsaid.<\/p>\n
He added both demand and rental rates were likely to increase
\nfurther early next year as the country entered a free trade era
\nunder the ASEAN Free Trade Agreement and its economic
\nfundamentals improved.<\/p>\n
However, Adhitya warned, developers should be cautious because
\nimprovements in the apartment business would depend very much on
\nsocial and political stability in this country, which would hold
\ngeneral elections in 2004.<\/p>\n
Furthermore, more strata-titled apartments will enter the
\nmarket when construction of the fifth and sixth phases of Taman
\nParis Apartments in Tangerang and the Luxury Da Vinci Apartments
\nin Central Jakarta is completed by 2003. In the following year,
\ntwo major projects -- the Gading Mediterania Residences, with
\n1,800 apartments in Kelapa Gading, North Jakarta, and Mediterania
\nGarden Residences, with 2,800 apartments in Grogol, West Jakarta
\n-- will enter the market.<\/p>",
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