Apartment prospects rely on expatriates

Apartment prospects rely on expatriates

JAKARTA (JP): Future demand for apartments in Jakarta depends
on the return of expatriates in response to the expected influx
of foreign investment, a property consultant says.

International property consultant FPD Savills says that demand
for apartments will grow in line with economic recovery, which
will bring foreign investors to Jakarta.

In its fourth quarter report, FPD Savills estimates that it
might take from two to three years for the number of expatriates
to return to the precrisis level.

The consultant predicts this year's occupancy rate for
upmarket apartments in the central business district (CBD) will
grow to 85 percent from 77 percent last year.

There will be new upmarket apartments available starting from
2002, with an annual level of approximately 238 new apartments,
Savills' report says.

Occupancy rates of middle-class apartments will also grow from
last year's 56 percent. However, the increase might not reach 65
percent for two or three years.

Savills attributed the low occupancy forecast to the
oversupply of middle-class strata title apartments, adding that
more new middle-class apartments could become available.

Upmarket CBD apartment rentals are expected to decrease
slightly during 2000 to a level of US$15 per square meter per
month from $16.5 in the fourth quarter of 1999. The decline will
follow the weak demand and new strata title supply that was or
will be completed in 1999 and 2000.

Middle-class CBD rentals will also bottom out in 2000 to a
level of $10 per square meter per month, following similar weak
demand and additional supply, the report says.

According to Savills, apartment rentals will increase by
approximately 20 percent during 2001.

The property consultant predicts a slight increase in demand
for houses despite an estimated hike of 5 percent to 10 percent
in land prices and possibly 5 percent in building prices.

Savills cited the resumption of extending home loans as a
factor behind the estimated growth in house demand.

The consultant reported that many considered houses to be a
safer investment when the rupiah weakened against the U.S. dollar
to more than Rp 10,000 at the peak of the economic crisis in
early 1998.

However, after deposit rates began to increase in the first
quarter of 1998, reaching 50 percent and above, consumers chose
to put their money in bank deposits which led to limited property
sales until mid 1999.

After the election of the new government and during the third
and fourth quarters of 1999, sales began to resume growth
slightly, the report says.

The improved availability of home loans and the drop in
interest rates on deposits to 12 percent also contributed to the
improvement in property sales.

Leading the recovery of the property sector, however, is
retail premises, Savills says.

Savills says the occupancy rate of retail property may reach
99 percent by 2001 as it already reached 95 percent in the fourth
quarter of 1999.

Another property consultant, Procon Indah/Jones Lang LaSalle,
is also placing confidence in retail property, saying that retail
space has showed significant improvement in 1999.

Procon Indah attributes the boost in retail property
rental/sales to the presence of hypermarkets, on which people
largely depend on for daily supplies. (03)