Housing market seen stronger next year on continued high demand

The Jakarta Post, Jakarta

After improving significantly this year, the housing market should continue to strengthen next year with demand remaining strong, especially for houses in the middle and upper-class categories, experts said.

High demand for housing will continue not only because of stable political and macroeconomic conditions, but also due to the recent trend of families looking to upgrade to larger, more expensive houses after paying off their first houses.

Eppi Pribudhi Soeriawidjaja, president of property developer PT Catur Mitra Persada, said this was the reason demand for middle to upper-class houses would remain high.

"I'm optimistic the housing market for the next year will remain good, just as this year, maybe even better," Eppi, also a top official at the Indonesian Real Estate Association (REI), told The Jakarta Post on Wednesday.

He said the current declining trend in domestic interest rates, plus a relatively stable exchange rate for the rupiah against the US dollar, boded well for the housing market because it would revive consumer confidence and encourage people to buy new homes.

These same macroeconomic factors have been credited with driving the housing market boom this year.

In the doldrums throughout the late 1990s economic crisis, housing construction experienced a rapid recovery this year with new houses flooding the market to meet the strong demand.

REI has predicted that construction of middle and upper-class houses this year will reach about 6,796 and 1,401 units, respectively.

These figures are considered high compared to the levels of three and four years ago, although they still do not match precrisis levels.

As for low-cost housing, REI said the overall trend was also upward.

For this year, REI said the supply of low-cost houses would reach 130,000 units, almost equal to the precrisis level, with an expected increase in 2003.

Eppi said the strong demand for new houses could also be seen in the crowded housing exhibitions that have been held in Jakarta.

"Most of those exhibitions have been successful," Eppi said.

Meanwhile, Doli D. Siregar, a property analyst, said next year's housing market would also depend on how the Indonesian Bank Restructuring Agency (IBRA) dealt with its property assets.

"Many of the property assets under IBRA are tainted by legal disputes. These should be resolved first because the public is keeping a close eye on those assets. If IBRA can eliminate those problems, this would do good for the overall housing market," Doli told the Post.

IBRA currently controls property assets valued at more than Rp 50 trillion (US$5.5 billion). It took over the assets from debtors as collateral for their debts to the state.

The agency is mandated to sell these assets to raise funds to help finance the state budget.