Jakarta condominium market remains bleak: Consultant

JAKARTA (JP): Sales in Jakarta's condominium market are projected to remain stagnant over the next six months due to expected political and social tension ahead of the general and presidential elections.

Property consultant Procon Indah, in association with Jones Lang LaSalle, said on Wednesday that in the long term, consumers purchasing power must first be restored for condominium sales to improve.

"Demand for condominiums will continue to remain slow in the short term," it said in its first quarter report.

It said the market was expected to see further falls in prices, although stronger developers might maintain their prices and try to increase revenue by offering unsold units as rental apartments.

Procon Indah projected that condominium sales would improve in early 2001, assuming the elections run smoothly, the economy begins to recover in the middle of 2000 and interest rates and inflation drop below 20 percent and 10 percent respectively by the end of 2000.

It reported that demand in the condominium market continued to weaken during the first quarter of this year due to a significant decline in purchasing power, lack of mortgage facilities and political and social instability.

It pointed out that only a few transactions occurred between October 1998 and March 1999, mainly in the city's central business district.

"Inquiries about condominiums remained low over the review quarter," it said.

The consultant reported that buyer defaults continued to increase, causing the negative take-up of 62 units in the strata- title apartment market during the fourth quarter of 1998.

It said almost 90 percent of returned units were lower to middle-priced segment apartments. These units are priced below Rp 5 million (US$575) per square meter.

This reflected a significant drop in affordability or a lack of confidence in this market segment during the crisis, it said.

Condominium prices in rupiah terms have declined since the beginning of 1998, the consultant said.

"The price increase in US dollar terms over the past six months was due to the strengthening rupiah against the dollar," it added.

Procon Indah said the price of prime condominiums in the central business district declined by 9 percent in rupiah terms to Rp 9.10 million per square meter over the fourth quarter of 1998.

While in equivalent dollar terms, prices increased by 21 percent over the quarter. However, prices dropped by 46 percent compared to prices a year ago, it said.

"Prices have fallen by 57 percent since the onset of the economic crisis in July 1997," Procon Indah said. (rei)