Crisis sees housing sales slump by up to 50 percent

JAKARTA (JP): Housing sales transactions in Greater Jakarta dropped by between 40 percent and 50 percent over the last six months due to weakening purchasing power and the difficulties of taking out a mortgage from private banks, an executive of property consultancy company PT Procon Indah said yesterday.

The firm's latest research into the property market showed that cumulative transactions for the period reached 489,300 units, or 73 percent of the 668,000 units placed on the market up to the end of last month.

Bayu Utomo, an associate director with the firm, said transactions on houses below Rp 50 million (US$6,250) dropped by 39 percent on the previous six month period, while deals on lower-middle (between Rp 50 million and Rp 100 million) and middle (between Rp 100 million and Rp 125 million) priced houses dropped by 48 percent and 24 percent respectively.

The research revealed that houses in the middle price range dominated the housing supply, accounting for 60 percent of the houses offered for sale.

Bayu said the 688,000 units placed on the market were part of the total supply of 1,612,000 units, a figure which includes houses still under construction.

Housing sales were projected to decline for the rest of this year because of high interest rates and inflation, Bayu added.

In a bid to boost sales, some property developers are now trying to attract customers by offering special deals. Among current marketing initiatives is a scheme which offers buyers a 100 percent refund of the initial purchase price after a period of several years.

However, most developers prefer not to hold promotions and instead rely on in-house marketing to keep costs down.

Lucy Rumantir, a Procon director, said developers had shown a tendency to stop construction and avoid long term investments since the crisis began to bite.

"Nothing that the government can do will motivate the developers to construct more houses," she said.

She said developing new houses was not a rational choice given the prevailing financial conditions which have caused the cost of constructing a house to increase by up to 40 percent.

Some developers have even lowered the specifications for housing and infrastructural developments in a bid to cut costs, she said.

The crisis, which was precipitated by a dramatic plunge in the value of the rupiah against the U.S. dollar, has also led to windfall gains for some lucky people.

Between January to February, many people opted to invest money in buying housing units in prestigious locations including Kota Wisata in Cibubur, and Bintaro Jaya estate in South Jakarta, and paid in cash.

In Bintaro, sales in January were almost double the average monthly sales from September to December last year. Middle and middle-upper priced houses proved to be the most attractive investments.

The depreciation of the rupiah also created an opportunity for foreign investors to buy shares in golf courses here. (cst)