Apartments everywhere, but few tenants

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.