Demand for leased apartments may further decline

Demand for leased apartments may further decline

Rikza Abdullah, Contributor, Jakarta

The demand for leased apartments in the greater Jakarta area
is likely to decline this year due to worries about terrorist
attacks but the sales of strata-titled condominiums may continue
increasing at a slow rate, according to property analysts.

"In the leased apartment market, there will be a decreasing
trend in the occupancy rates due to worries about terrorist
attacks and threats to foreigners," Adhitya Wisesa, manager/head
for property research and consultancy of Colliers International
Indonesia, said here on Friday.

He said that many expatriates went back to their home
countries and found other jobs there, while foreign investors
canceled their projects in, and business trips to Indonesia. This
negatively affected demand for leased apartments in Jakarta.

Dharmesti Sindhunatha, senior manager for marketing and
communications at property consulting company PT Procon Indah,
said the high growth in the supply of strata-titled condominiums
would also affect growth in the rental apartment market.

She said that in 2002, demand for leased apartments still
continued its recovery trend after being hard hit by the economic
crisis that began in 1997. The increasing demand was marked by
the additional leasing of 535 units, as compared to only 375
units taken up in 2001. The additional leasing increased the
occupancy rate of leased apartments to 63.5 percent last year
from 59.8 percent in 2001.

Adhitya quoted a more positive figure, 69.1 percent, for
2002's occupancy rate.

According to Colliers International, the number of leased
apartment units, which stood at about 6,200 as of the end of
2001, increased by 100 after the completion of the Pondok Indah
Golf Apartment Tower 2 in South Jakarta last year.

Out of the leased apartments, around one third were serviced
and the other two thirds were non-serviced ones.

Adhitya said last year's increase in the demand was driven
particularly by an increase in the number of expatriates working
in Jakarta and the rising trend of expatriates to lease
apartments, instead of houses, due to economical, security and
personal safety concerns. The number of expatriates working in
the capital city, which dropped from about 40,000 before the
economic crisis to about 10,000 in 1998, increased to around
12,000-13,000 last year.

This rising demand motivated developers and owners to lease
their strata-titled apartments/condominiums at more competitive
rates with more flexible terms, resulting in the expansion of the
market share of condominium units for lease and the contraction
of rental apartments' share.

According to Dharmesti, the number of strata-titled apartments
leased to tenants by their developers or owners reached 8,740 in
2002.

But the demand for leased apartments was on its downward trend
following the Oct. 12 terrorist attacks in Bali, which killed
more than 190 people, and targeted Westerners.

Adhitya said the demand for premium-grade leased apartments
would continue declining this year but that secondary-grade units
might enjoy slight growth because the latter's rental rates were
mostly affordable for local executives.

He said this year would also witness the growth of demand for
strata-titled apartments as this sector was enjoying a high
occupancy rate.

Colliers International puts the figure for the occupancy rate
of strata-titled apartments at 79.6 percent in 2002, while Procon
Indah estimates it at 79.2 percent, indicating a 2.1 percent
increase from 77.1 percent in the previous year.

As of the end of 2002, the supply of strata-titled apartments
in Jakarta, according to Procon Indah, increased by 0.9 percent
to about 26,550 over the previous year.

"The total take-up (of strata-titled apartments) during 2002
was recorded at 631 units, a significant increase as compared to
only 210 units in 2001," Dharmesti said.

Adhitya commented that although the imposition of a 20-percent
luxury tax on the sales of new apartments was still considered an
obstacle for the residential property market, the real demand
continued to indicate a positive growth.

But the trend, he said, was that buyers were no longer
interested in the available strata-titled apartments. They now
preferred to buy units that were currently being constructed or
were even still under a plan for construction.

The 360-unit Bellagio Mega Kuningan apartment building, which
will be built by PT Sentra Lingga Perkasa in South Jakarta, for
example, had already sold almost 90 percent of its units as of
October, even though its construction might not be completed
until 2005.

PT Aneka Bina Lestari Senayan has also been successful in
selling its units facing the Central Business District (CBD) of
its 140-unit Pinnacle apartment building, which it plans to
construct on Jl. Sudirman in South Jakarta. The other units would
be offered for lease after the completion in 2005.

Besides the Bellagio Mega Kuningan and Pinnacle, the other
apartment buildings that will be constructed in the city include
the 1,000-unit Mediterania Gajah Mada in West Jakarta, the 1,500-
unit Mediterania Palace at Kemayoran, Central Jakarta, the 68-
unit SCBD Suites in South Jakarta, the 180-unit Thamrin Exchange
Square in Central Jakarta, the 200-unit Grand Permata Hijau in
South Jakarta and the 700-unit Pakubuwono Exclusive Condominiums
in South Jakarta.

Adhitya said most buyers of strata-titled apartments were
those who procured them for an investment purpose. The interest
of such people in buying new apartments would not be affected by
the imposition of a luxury tax nor by the possible increase in
prices resulting from the recent hikes in utility prices.
Earlier this month, the government simultaneously increased fuel
prices by an average of 22 percent, electricity billing rates by
6 percent and telephone charges by 15 percent. The rise in
telephone charges was put on hold on Wednesday following strong
protests nationwide.

Thus, "Colliers International concluded that in the strata-
titled market, the premium-grade apartments will still enjoy a
high occupancy rate in 2003," he said.