Demand for luxury condos to soar
Demand for luxury condos to soar
Sari P. Setiogi, The Jakarta Post, Jakarta
The supplies of luxury condominiums for the middle and upper-
end of the market in Jakarta will remain flat this year, while
demand for them is likely to soar.
Willyanto J. Halim, a property analyst with consulting firm PT
Procon Indah, told reporters that supply would remain stagnant at
1999's level of 1,946 units due to the absence of new
developments.
Luxury condominiums account for only about 8 percent of the
25,633 condominium units currently available in the city. Most
luxury condominiums are located in the heart of the city with
easy to access to places of work and other parts of the city.
Willyanto said that demand was likely to surge significantly,
so that more than 80 percent of the supply would be sold out by
the end of this year, as compared to 72 percent at the end of
last year.
He explained that this year's higher demand would be caused by
an improvement in market confidence and the presence of pent-up
demand, a side effect of the economic crisis that began in mid-
1997.
The crisis discouraged potential consumers from buying luxury
condominiums, each of which costs US$1,200 or more per square
meter, while the rupiah's value has decreased from Rp 2,400 per
U.S. dollar in the middle of 1997 to about Rp 9,000 at present.
Over the last few years, the growth in demand for condominiums
was also slowed by the imposition of a 20 percent luxury tax on
sales.
"There is a lot of cash in the city and most Indonesians now
prefer to put their money in property as an alternative
investment. Also, better education means that they place more
value on the money they pay, and upper segment condominiums will
be their choice," Procon Indah's chief executive officer David
Cheadle told The Jakarta Post.
Willyanto said the strong demand for luxury condominiums
actually started late last year when developers were able to sell
about 20 percent of the condominiums that they planned to
construct this year and next year.
"The construction of most of the planned condominiums will be
completed in 2005," he said.
The construction of the 55-unit Airlangga Residences
condominium building in Kuningan, South Jakarta, he said, would
be completed in 2004, while the 68-unit SCBD Suites, the 124-unit
Pinnacle on Sudirman, South Jakarta, and the 180-unit Bellagio
Mansion in Kuningan would be completed in 2005.
He said there should actually be one more project, the Thamrin
Exchange Square with 184 units in Central Jakarta, but its
construction was postponed due to an administrative problem
related to the land.
Willyanto also said that the demand for luxury condominiums
would be even higher this year if luxury sales tax were to be
abolished.
However, developers tried to help buyers avoid paying the
luxury sales tax by offering their condominiums under long-term
lease (leasehold) agreements, under which buyers could occupy
their condominiums for the same length as the 35-year term of a
strata title.
Besides luxury sales tax, condominium sales are also subject
to 10 percent value added tax (VAT) and 5 percent charge for land
and building acquisition.
Sari P. Setiogi, The Jakarta Post, Jakarta
The supplies of luxury condominiums for the middle and upper-
end of the market in Jakarta will remain flat this year, while
demand for them is likely to soar.
Willyanto J. Halim, a property analyst with consulting firm PT
Procon Indah, told reporters that supply would remain stagnant at
1999's level of 1,946 units due to the absence of new
developments.
Luxury condominiums account for only about 8 percent of the
25,633 condominium units currently available in the city. Most
luxury condominiums are located in the heart of the city with
easy to access to places of work and other parts of the city.
Willyanto said that demand was likely to surge significantly,
so that more than 80 percent of the supply would be sold out by
the end of this year, as compared to 72 percent at the end of
last year.
He explained that this year's higher demand would be caused by
an improvement in market confidence and the presence of pent-up
demand, a side effect of the economic crisis that began in mid-
1997.
The crisis discouraged potential consumers from buying luxury
condominiums, each of which costs US$1,200 or more per square
meter, while the rupiah's value has decreased from Rp 2,400 per
U.S. dollar in the middle of 1997 to about Rp 9,000 at present.
Over the last few years, the growth in demand for condominiums
was also slowed by the imposition of a 20 percent luxury tax on
sales.
"There is a lot of cash in the city and most Indonesians now
prefer to put their money in property as an alternative
investment. Also, better education means that they place more
value on the money they pay, and upper segment condominiums will
be their choice," Procon Indah's chief executive officer David
Cheadle told The Jakarta Post.
Willyanto said the strong demand for luxury condominiums
actually started late last year when developers were able to sell
about 20 percent of the condominiums that they planned to
construct this year and next year.
"The construction of most of the planned condominiums will be
completed in 2005," he said.
The construction of the 55-unit Airlangga Residences
condominium building in Kuningan, South Jakarta, he said, would
be completed in 2004, while the 68-unit SCBD Suites, the 124-unit
Pinnacle on Sudirman, South Jakarta, and the 180-unit Bellagio
Mansion in Kuningan would be completed in 2005.
He said there should actually be one more project, the Thamrin
Exchange Square with 184 units in Central Jakarta, but its
construction was postponed due to an administrative problem
related to the land.
Willyanto also said that the demand for luxury condominiums
would be even higher this year if luxury sales tax were to be
abolished.
However, developers tried to help buyers avoid paying the
luxury sales tax by offering their condominiums under long-term
lease (leasehold) agreements, under which buyers could occupy
their condominiums for the same length as the 35-year term of a
strata title.
Besides luxury sales tax, condominium sales are also subject
to 10 percent value added tax (VAT) and 5 percent charge for land
and building acquisition.