Affordable apartment market needs boost

The Jakarta Post, Jakarta

Standing in front of a booth at a property exhibition, businessman Lucas was speaking with a marketing officer from an upmarket condominium group about adding a luxury apartment to his list of property assets.

"This year, I am planning to buy another one," said Lucas, adding that he had already leased two apartments located strategically in the heart of Jakarta.

The country's property sector -- which was blamed as one of the factors that caused the mid-1997 monetary crisis in the country -- is on the rise again as evidenced by a big construction push, which started after 1999. And the capitalization was reported to be 10 times higher in 2003.

Apartments, as part of the property sector, have also been rising in number due to land efficiency and shift of lifestyle in the metropolis.

According to research done by the Center for Indonesian Property Studies (CIPS), there will have been 65,000 new apartments made available in the 1999 to 2007 period.

By comparison, during the 1980 to 1998 period, there were only about 25,000 units available.

Unlike a lot of other countries, apartments in Jakarta are built almost exclusively for the high-end market instead of middle or working classes. However, it is those latter two that most in need of affordable housing and efficient living.

Moreover, for the low-cost apartments that are built, most of the units end up in the hands of property investors and speculators instead of low-income families, which is one of the reasons why such property is not an answer to the city's housing problems.

"We have to consider the skyrocketing land prices in strategic locations, and that means we need to cater to the wealthier people to make a profit," claimed Gapura Prima managing editor, Djohan Fang. "But we cannot detect whether the buyers are end- users or investors."

The Gapura Prima group is the developer of plush apartments The Bellagio, The Bellagio Mansion and The Belleza, located in Kuningan and Permata Hijau, South Jakarta.

But several marketers of apartments at the property expo said that at least 50 percent of their buyers are not end-users, such as Lucas who himself lives in a house in South Jakarta.

"For now, there is already enough supply for the high-end market," said leading property consultant Panangian Simanungkalit. "The most potential market is actually the middle class, with prices ranging between Rp 150 million and Rp 200 million."

Unfortunately, he added, there have been few developers interested in that market segment due to smaller profits.

According to the CIPS research, total housing needs in Jakarta is about 71,650 units per year. Some 60 percent of it is the potential for middle-lower market apartments, leaving some 10,000 units of demand per year.

The figure does not include the suburban population on the outskirts of Greater Jakarta.

"As long as there are no additional market players in this segment, there will be a constant demand potentially served," Panangian said.

He mentioned that tax incentives and cross-subsidies in housing could be offered to developers in a bid to lure them to build for the middle and lower class markets, which still have great potential.

Urban planner and lecturer at the Bandung Institute of Technology's School of Architecture, Achmad Tardiyana, backed the idea that property market, especially in the capital, needs intervention from the government so that it can provide affordable and efficient housing for all segments of society.

"It is just the developer's choice in targeting upper class markets due to the already high land prices in the downtown area," he said. "The government must intervene in the market through a social housing subsidy."

Achmad explained the contrasting income gaps among people will force the weak to be marginalized and have less access to reside in the city's central areas. (003)