Apartments everywhere, but few tenants

Abdul Khalik, The Jakarta Post, Jakarta

New apartments and condominiums continue to flood the capital's market despite the fact only few of them are being occupied. What prompts developers to continue to build new apartments and condos? The following is the first of a series of articles on apartments and condominiums in the capital.

Driving past apartment and condominium buildings in the capital in the evening, you would immediately notice that most of units were dark, suggesting they were not being occupied.

But, ask the marketing offices or developers of the apartments and condominiums, they would likely suggest that their apartments and condominiums were sold out, or at the very least 85 or 90 percent sold.

But where are the tenants?

Research analyst Hadi Syamsudin of property analyst firm Coldwell Banker Commercial Indonesia told The Jakarta Post that a great majority of Indonesians preferred staying in residential complexes to living in apartments and condominiums, which are often identified with individualistic lifestyles.

He added that Jakarta families were just not yet accustomed to living in apartments and condominiums.

That, however, does not seem to prevent property developers from building new apartments and condominiums in the capital, a city of around 10 million.

Property developers, including Agung Podomoro, Artha Graha and Gapura Prima, continue to build condominiums and apartments in the capital, adding to the existing stock of around 45,000 units in April 2005.

Expected to come on stream in the second quarter of 2005 are 1,718 condominiums from several projects in Central and South Jakarta, including the Sudirman Mansions, SCBD suites, Bellazzio Tower 1, Poin Square Apartments, Airlangga Apartments, Bellagio Mansions and Bellagio Residence, while 168 new apartments are expected from Aston Rasuna and Marriott Executive Apartments.

Recent research from Coldwell suggested that many Jakartans buy apartments and condominiums either to gain profit when they resell the units, or to rent them out, rather than to use them as residences.

"Most apartment and condominium buyers want to rent out their units to expatriates or local executives and professionals, while some of them buy the units to gain price margins when they resell them. So, most buyers have no intention of staying in the apartments and condominiums," Hadi said.

According to Coldwell, to April 2005 all apartments and condominiums coming onto the market had been sold to between 85 percent and 95 percent of the total 45,000 units in the capital.

"Many Jakartans have the purchasing power to buy several apartments and condominiums, and judging from the sales level of condominiums and apartments, we seem to have many rich people in Jakarta. Many of them even buy two or more rooms in each project," Hadi said.

Current average selling price of condominiums in 2005 is Rp 8.31 million per square meter (sqm), an increase of 5.19 percent over the level at the end of 2004, while the average apartment selling price is Rp 6.84 million per sqm, up by 3.95 percent over the previous semester.

Rental prices remain relatively stable, ranging from US$2.84 to US$27.06 per sqm per month, a slight increase of some 0.72 percent over that of the end of last year.

Beside expatriates, the target market of people who stay in apartments or condominiums are young executives or young couples who have just arrived from abroad, and the children of the wealthy who want to be independent.

High margins are also one of the driving forces why developers continue to build apartments and condominiums, as just 50 percent sales means that developers will recover their total investment.

Many developers finance their projects with investments from internal capital and individual investors as banks are still unwilling to give out large loans.

"Around 70 percent to 80 percent of money invested in the projects comes from private individual funds, as banks are still reluctant to channel loans. People want to invest in a project for much higher gain," Hadi said.

Developers also often used down-payments from buyers to begin construction if the developers had acquired the lands, he said.

Hadi predicted that developers would keep on building new apartments and condominiums until 2007 when the market was expected to be saturated.