Developers forced to lower property prices
Developers forced to lower property prices
JAKARTA (JP): Property analyst Panangian Simanungkalit said
yesterday the current monetary upheaval would force developers to
lower property prices to a "fair" level in order to survive and
gain customers.
"In theory, developers are unlikely to raise property prices
amid the current tight monetary condition because they need a lot
of funds while the property demand is depressed," Panangian said.
He said developers lacked funds because of an increase in the
banks' lending rate and the government's regulation in July which
barred banks from giving credit to developers to appropriate land
for real estate.
Banks' lending rates have increased to between 25 percent and
30 percent from between 18 percent and 22 percent in July,
following the tightening of the monetary policy in the middle of
last month.
Panangian said developers also had to pay higher development
costs following the downfall in the rupiah's value since many
components of property projects were imported or paid in dollar.
"Developers have to cut prices. Otherwise, they will be
abandoned by buyers and go bankrupt," Panangian said.
He predicted developers would increase the price of middle-to
upper housing by up to 20 percent but retain the price of modest
housing.
Developers, however, would not suffer losses due to price
discounts but only have their profit margin cut from by between
40 percent and 50 percent to a range of 10 percent to 15 percent,
he said.
"This will lead to a fair price level for the public. The
profit margin of up to 50 percent enjoyed by developers in the
past was too high," Panangian said.
According to him, only developers with good financial
structure, professional human resources and good planning could
survive the current monetary difficulties. This group accounts
for about 60 percent of the country's total 2,500 developers.
The remaining 40 percent of developers would go bankrupt or be
forced to move to other businesses, he said.
Meanwhile, property consultant Burwood Publishing Indonesia
reported over the weekend that licensed investment in property
development had decreased 190 percent to Rp 983 billion (US$338.9
million) this month with 11 projects, compared with Rp 3.07
trillion in July. Last month, licensed investment projects in
real estate were worth Rp 2.7 trillion.
The September issue of Burwood Report said four of the 11
property projects which were licensed this month were located in
Jakarta.
The projects include development of the Bintaro Jaya Megamall
worth Rp 375 billion, the Pluit Karang Plaza (Rp 240 billion),
the Arion Ibis Hotel (Rp 40 billion) and renovation of the Kramat
Jati marketplace (Rp 27 billion). (jsk)