FOCUS ISSUE: Sunday - Feb.26 -- APARTMENT

Jakarta will have 54 more apartment buildings

Hendarsyah Tarmizi The Jakarta Post/Jakarta

At least 54 new condominium (strata-titled apartment) projects are under construction in Jakarta, adding more than 3,400 new apartment units to the growing condominium market in the capital.

According to a quarterly research report by Colliers International Indonesia, 19 of the new condominium projects will be completed this year, other 25 projects in 2006 and the remaining 10 projects in 2007.

The new condominium projects, which will enter the market this year, will include Airlangga Apartment, Bellagio Mansions and Bellagio Residence which are now under construction at Mega Kuningan, South Jakarta.

Other new condominiums scheduled for opening in 2005 include Belleze Permata Hijau in Permata Hijau housing complex in South Jakarta, Mediterania Gajahmada Residence on Jl. Gajahmada, Central Jakarta and Mediterania Palace Residence in Kemayoran, Central Jakarta.

The construction of the new strata-titled apartments reflects the continued recovery of the strata-apartment market, which recorded an impressive sales performance in 2004.

In its report Colliers said that strata-titled apartments dominated the apartment market in 2004, accounting for 83.4 percent of the total apartment stock in Jakarta.

The cumulative supply of condominiums during the year reached a total of 31,500 units, the highest during the past six years. Two large apartment blocks, Mediterania Garden Residence I in Slipi, West Jakarta and Laguna Pluit Apartment in Pluit, North Jakarta contributed about 4,000 units to the total supply.

The take-up rate was recorded at 75.4 percent, meaning that about 2,375 units of the total supply were sold during the year. This represented an eight-fold increase compared to the number recorded in 2003.

A similar impressive performance of the country's condominium market was also reported by property consultants Jones Lang LaSalle and Procon in their quarterly property market reviews.

The property industry, including the apartment sector, had almost came to a halt between 1998 and 2002 due to the impact of the worst ever financial crisis to hit Indonesia in late 1997.

The property sector began to show signs of recovery only in early 2003 thanks to an improvement in the country's economy. The recovery in the economy had resulted in a drop in the inflation rate, which in turn enabled Bank Indonesia, the central bank, to lower the interest rate of its promissory notes.

The interest rate continued to drop in 2004 to a range between 5 percent and 6 percent. The low interest rate has apparently resulted in an increase in condominiums sales as many investors, both individuals and institutions, shifted their investment funds from bank deposits to apartment units, which promise a higher return.

Like, Collier, Jones Lang LaSalle and Procon also attributed the remarkable growth in the condominium market in 2004 to the continued improvement of the country's economy and the low interest rate policy adopted by the central bank.

The drop in the interest rate for bank deposits made them unattractive for investment, and this has encouraged people to seek more promising investment options.

To many people, when interest rates are low, buying an apartment or other residential property is the best investment option.

With the current rate of between 5 percent and 6 percent offered by banks, an investor will have the chance to get a cheaper bank loan to purchase an apartment.

By investing in an apartment unit, one can earn a regular income from the rental of the apartment, which would be large enough to help pay the monthly installments. And if the investor sells the apartment unit, he or she will also have the opportunity to get a high return thanks to the appreciation of the price of the property.

Investing in property carries a relative low risk. Unlike stock prices, the price of property rarely goes down.

Lucy Rumantir, the national director of Jones Lang LaSalle property consultant, said condominiums or strata-titled apartments have become one of the most popular investment options for Indonesian investors.

"In fact, most of the condominium buyers bought the property for investment. Only 20 percent bought the apartment to live in," she said.

Colliers said that the construction of the new condominiums, which will provide 31,463 new strata-titled apartment units, will double the existing stock, and potentially result in an over supply especially in 2006 because about 65 percent of the new apartment projects will enter the market in the year.

The three property consultants share the view that the increase in the supply would further tighten competition in the condominium market. But they rule out the possibility of a drop in prices.

According to Colliers' report, the average asking price for middle to upper class strata-titled apartments within the central business district (CBD) area along Jl. Sudirman, Jl. Thamrin and Jl. Rasuna Said, Kuningan ranged from Rp 14 million (US$1,500) to Rp 24 million per square meter. In the non-CBD area, the price was somewhat competitive ranging from Rp 6 million to Rp 9 million per sq meter. However, for several middle-up apartment projects, the asking price was higher and offered at Rp 10 million to Rp 15 million per sq meter.

Procon and Colliers estimate that some developers would continue to offer incentives either in the form of price discounts or facilities to attract the buyer.

Colliers said that in anticipation of the tight market, some developers have offered a distinctive living concept to win buyers. For example, the Peak by Agung Podomoro Group that offers high-tech computerized units within its 55-story apartment tower and The City Loft by Duta Anggada Group that brought in the concept of a dual function of living and working called Small Office Home Office (SOHO).