Apartment supply expected to jump by 183% this year

JAKARTA (JP): Jakarta's apartment market will be heavily oversupplied this year because the number of apartments will jump 183 percent to almost 33,600 units this year, property consultant Colliers Jardine said yesterday.

The head of Colliers Jardine's research department, Evelyn Khoo, said that as of February, the number of apartments increased 4.7 percent or 551 units to 12,426 units.

"We expect more than 20,000 units will be completed this year," she said.

She said most of the new apartments would be small because developers were targeting the lower end of the market to combat weakening demand.

She said that as of February the average occupancy rate of strata apartments, which make up 67 percent of all apartments, dropped about one percent to 50 percent.

Last year the occupancy rate rose 3.7 percent from 47.3 percent to 51 percent.

The average occupancy rate of rental apartments, which make up 20 percent of all apartments, fell five percent from 93 percent last year.

Occupancy rates in serviced apartments, which make up 13 percent of all apartments, dropped from 85 percent to 80 percent.

She said rent prices in secondary areas were generally US$14 a square meter, while those in primary areas ranged between $17 a square meter and $39 a square meter.

The firm's chairman, Trevor J. Peach, said government regulation No.41/1996, which allows foreigners to buy property, had not yet created a sizable demand from foreign buyers.

"I notice from my own experience that foreigners are discouraged by an unclear criteria of foreigners eligible to buy property here," he said.

He said foreigners were also discouraged because their ownership was restricted to property built on land with a right of use title, which is valid for only 25 years with the possibility of a 25-year extension.

He said that because local people owned the property in Indonesia under the title of the right of building, foreigners wanting to buy would have to change it first into the right of use title. "This is another obstacle," he said.

Khoo estimated total office space would rise 18.4 percent to 3.8 million square meters this year, retail supply 17.62 percent to 2,003,000 square meters and hotel rooms 41 percent to about 21,200 rooms.

She said the total land zoned for industrial estates in West Java was 12,079,600 hectares. Of this only 9,073 hectares has been developed. About 2,800 hectares of the developed land is in Jakarta.

"I expect more companies will come to the industrial estates because of lower costs and the government's policy which encourages them to enter the estates," she said. (bnt)