~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.