Greater Jakarta property sees increase in foreign investment

Anissa S. Febrina, The Jakarta Post/Jakarta

With a number of Asian property developers constructing new office buildings in the capital, foreign investment in the Greater Jakarta property sector more than doubled in the first semester of 2005, a property research company reported.

According to Coldwell Banker Commercial (CBC) Indonesia, the value of foreign investment realized from January through July this year increased to US$5.92 billion from $2.49 billion in the corresponding period last year.

"The largest investors are from Japan and China, as well as other Asian countries," said CBC Indonesia senior technical adviser on research and consultancy Benjamin M. Lamberte.

One of the largest projects, according to the company, was the strata-titled office building Menara Sahid in South Jakarta. Half of the investment in the project -- or about Rp 250 billion ($24.75 million) -- came from China's Ruier International Group.

"Foreign investors have developed confidence in our market," Lamberte said, adding that the growth in office space would trigger a growth in luxury apartments as well.

This same trend, he added, has already occurred in Singapore, Hong Kong and the Philippines.

However, currently there is no additional supply of leasable office space in Greater Jakarta because several construction projects failed to meet their deadlines. The total leased office space in the capital was recorded at 2.37 million square meters (sqm) as of September.

Meanwhile, the supply of strata-titled office space remained stagnant at 302,676 sqm.

"As long as the economic situation remains promising for investors, there will still be demand for office space next year," said Lamberte.

In the residential subsector, CBC reported that from July through August most of the 6,070 new units supplied by developers were located in Bekasi.

More than 50 percent of the units are in the lower market segment, 37.74 percent are middle-class housing and 6.28 percent are in the upper segment.

However, the take-up level was spread quite equally, with 1,119 units of upper segment housing sold during the period, 1,738 units of middle class and 1,679 of lower segment.

"With the trend of slower expansion next year, it would be a good time for developers to review the market and build new marketing strategies," Lamberte said.

The demand for residential units, especially for real estate and town houses, will remain high despite increasing prices and higher interest rates, he said.

In the apartment market, with a cumulative stock of 10,645 units -- in both primary and secondary areas -- as of September 2005, the demand for upmarket units will continue to grow with the coming of foreign investment.

CBC reported that there would be 1,585 new units coming to completion during the next couple of years, as the cost of construction and lending interest rates rose.