~For Special Edition --- Apartment Living

~For Special Edition --- Apartment Living

Jakarta apartment market upbeat under the shadow of oversupply

By Rudijanto
Contributor
Jakarta

Indonesian apartment market is expected to remain strong as
apartment is still seen as a more profitable investment compared
to the currently low bank deposit rate but the shadow of
oversupply or imbalance between demand and supply persists.

Data from property consultants and analysts show a jump in the
annual supply of apartment units launched in the market. Not only
the units to be completed within this year but those scheduled to
be finished in the coming years are also on the rise.

Collier International Indonesia (CII) predicts the Jakarta
apartment market supply will experience significant growth of
56.3 percent in 2006. This will bring an additional 21, 385 units
onto the market and resulting in a rocketing cumulative supply of
more than 59,300 units.

Property analyst Panangian Simanungkalit was quoted by Kompas
as saying that each year around 6,500 new apartment units being
constructed during 1999-2005 compared to 1,300 units per annum
during 1980-1998.

With the 2006 annual supply to be recorded as the highest
annual supply ever in the market's history, shadow of oversupply
has started to create concern of some players in the market.
Though, some other players remain optimistic on the market
prospect.

"Yes, there is already an oversupply in certain areas but not
in prime areas such as in Mega Kuningan area, which is very good
area because of availability of road accesses to other important
roads such as Rasuna Said, Casablanca and Sudirman," said
Bellagio's executive director Sebastian Gunadi.

CII's latest report mentions CBD and South Jakarta as the
major development destination of apartments. According to the
report, this trend in development in the two areas will likely
continue until 2007. The question is can the would-be built
apartments in the area still find buyers?

In this year alone, South Jakarta area witnesses the
construction of Bellezza de Case Tower 1 in Permata Hijau,
Pakubuwono Residence in Kebayoran Baru, and Pondok Indah Square
in Lebak Bulus.

Some other apartments all in South Jakarta, including Somerset
Berlian Residence in Permata Hijau, Bellezza de Case Tower 2 also
in Permata Hijau, Kemang City Tower A-B-C, in Kemang will
commence construction in 2006.

Somerset Berlian Residence itself consist of two towers, i.e.,
North Tower with 210 units and South Tower with 186 units. Each
tower has 8 units of penthouses. This apartment is developed by
Pakuwon Group, known for pioneering the development and operation
of commercial centers and large-scale cluster housing projects.

While those apartments are aiming at high class Indonesians
and expatriates, other apartments are apparently aiming at lower-
middle market segment by pricing their units between Rp60 million
to Rp300 million. But most of these lower-middle segment
apartments are located outside the CBD areas, for instance
Salemba Residence.

Developed by Adhi Realty in partnership with Malaysia-based
Eden Capital Sdn. Bhd., this apartment in Salemba area offers
small units with single and double room and priced at Rp165
million to 190 million. But this apartment also sells larger
units priced at around Rp700 million.

While these middle segment apartments have clear market due to
their proximity with universities, some other middle segment
apartments simply rely on their affordable prices. With such
prices, they can only construct in the suburb of Jakarta or even
in the Greater Jakarta areas

Taman Semanan Indah in West Jakarta's Outer Ring Road, near
Tangerang, is such an apartment. Taman Semanan Indah offers small
units with one or two rooms at Rp60 million to around Rp200
million.

Commenting on the apartments in Greater Jakarta, Sebastian
questions the substance of such apartments. For him, the basic
substance or reason of people living in apartments is that their
residence is near to the office.

"Commuting more than an hour just to go to the office does not
make sense for increasing number of foreign graduates. They want
to live near their working place. If that requirement is not
fulfilled in apartment, then what is the use of living in
apartment?" said Sebastian.

Jakarta's traffic congestion has put additional pressure for
people to move to apartments adjacent to their offices. For these
class of people, apartment living is more than just a lifestyle
but becomes a great need.

Aside from targeting these people, Jakarta's apartments around
CBD are also aiming at investors. Rather than putting their money
at lower-rate bank deposit, wealthy Indonesians expect to gain
more by purchasing apartments in and around CBD and increasing
prestigious areas in South Jakarta, such as Kemang and Pondok
Indah.

Bellagio's developer PT Centra Lingga Perkasa is clearly
aiming at such wealthy class by offering two of its projects,
namely Bellagio Mansion and Bellagio Residence. Both apartments
are located in Mega Kuningan area.

"The demand is strong here due to our location. We will hand
over 600 units already soon out of a total of 800 units in
Bellagio Residence, while in Bellagio Mansion, we will hand over
135 units in October," Sebastian said.

Somerset Berlian in South Jakarta's prestigious Permata Hijau
area also recorded strong demand with 70 percent of its units on
the south tower sold. Pakuwon Group expects by the end of this
year, 90 percent of the units of south tower and 60 percent of
north tower will be sold out.

"The demand is still good as we are offering new kind of smart
investment in serviced apartments. This particular market of
serviced apartment is in high demand. We are optimistic with the
market prospect because investment is still growing and
expatriates are increasingly coming," said Yayuk Rahayu of
Pakuwon Group.

She also said that the optimism also comes from Somerset
Berlian's prime location. The apartment is near well established
Pondok Indah neighborhood with its shopping mall, international
schools and other public amenities. It has well developed access
to Kebon Jeruk and CBD's main road Sudirman.

"Our security system is supported by a CCTV system and panic
buttons. These are conveniently located within every unit for
urgent assistance. We also have water feature, reflexology pool,
children fun pool, outdoor Jacuzzi pool, jogging track and
pedestrian walkway," said Yayuk.

As various developers are scheduled to complete and construct
their units within this year and the coming years, Jakarta will
remain as a hot market for apartment. But outside Jakarta,
particularly in Singapore and Australia, developers are also
boosting their campaign to attract wealthy Indonesians to invest
in apartments in those countries.

The campaign to attract Indonesian buyers succeeded as Kompas
daily reported that Indonesians constitute the biggest buyers of
Singapore property, followed by Malaysia, Brunei Darussalam, Hong
Kong and Shanghai.

However, optimism is still high among Indonesian developers
that they will not lack buyers. They said investors had suffered
losses in Singapore apartments due to drop in property price up
to between 35 percent and 45 percent and low rental income.

"Singapore apartments have been over supply. The yield return
is less than that of investment in apartment here. Beside, it is
hard to maintain due to the unit far away from home," said Yayuk.

Either for accommodation or simply for investment, Jakarta
offers various apartments of all classes. In spite of this fact,
a good number of Indonesians still prefer to invest in overseas
apartments. This remains to be a question to be pondered upon by
domestic apartment developers, operators and policy maker.