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.