Jakarta's property market outlook for next year
Jakarta's property market outlook for next year
By Benget Simbolon Tnb.
JAKARTA (JP): Property analysts differ in their outlooks for
next year. Many are bullish about the property business, others
are pessimistic, but they all agree that the general election in
May poses a big question mark.
"I think for the next three to four months the market will be
quiet as people wait until the general election. Then a growing
demand for property stocks will fuel the business," Craig
Williams, a technical advisor to PT Procon Indah, a property
consultancy firm, told The Jakarta Post.
Ciputra, the property tycoon who controls the big developer
Ciputra Group, noted that it was very difficult to make
predictions in the property business. "The year 1997 is a year of
uncertainty," he said.
The Econit Advisory Group said that the government regulation
which allows foreigners to buy houses in Indonesia and the
mortgage law that was approved by the House of Representatives a
few months ago will help strengthen the property market next
year, particularly for middle- and upper-class houses.
But Panangian Simanungkalit, the chairman of the property
consultancy PSPI Research, said the property business would be
adversely affected by financial and legal problems, oversupply
and weakening demand.
Weakening demand is partly a result of perceived political
uncertainty, he said, adding that banks are likely to reduce
their exposure to property by 41.67 percent from Rp 12 trillion
(US$5.17 billion) this year to Rp 7 trillion next year.
He predicted that problem loans in the property sector would
increase 6.67 percent to Rp 5.6 trillion next year from Rp 5.25
trillion this year.
"The monetary authorities will tightly control new bank
credits to the property sector," he said.
Panangian told The Post that the legal problems currently
faced by developers were caused by the government's recent
decision to stop issuing new land licenses for housing projects
in the greater Jakarta area. Some 625 developers, or 25 percent
of the country's 2,500 developers, will go bankrupt next year, he
predicted. However, he said, the property sector could still grow
11.1 percent next year.
Housing
According to the Econit Advisory Group, the total supply of
luxury houses will drop to about 110,000 units in 1996, from
about 145,000 units in 1995.
The number of middle-class houses will drop from 142,000 units
1995 to about 108,000 units this year, while the number of lower-
income houses will drop from around 130,000 units in 1995 to
about 102,000 units in 1996.
The supply is expected to increase next year to meet the
demand for middle- and upper-income housing.
National demand is estimated at 780,000 houses per year, of
which 15 percent is in Jakarta alone.
The government's decision to stop giving land licenses to
developers in the greater Jakarta area will mostly hit small-
scale developers, and could become a boon for the big developers.
Econit predicted that at least 21 major projects in Jakarta
(see table) -- including Bumi Serpong Damai, Alam Sutra, Lippo
Cikarang and Tiga Raksa, all controlled by big developers -- will
benefit from the ruling.
Office space
PT Procon Indah said the supply of office space would increase
37 percent, or 426,000 square meters, to about 2.5 million square
meters for 1996.
Next year, the supply will increase 9.6 percent to about 2.8
million square meters.
Office rental rates are predicted to be stable at an average
of US$13 per square meter per month in the central business
district (CBD) around Jl. Thamrin, Jl. Sudirman, and Jl. Gatot
Subroto and Kuningan. Outside of the CBD, rates will be between
$8 and $11 per square meter per month.
The occupancy rate is expected to decrease from 90 percent
this year to 87.5 percent next year. The firm also predicted an
oversupply of office space despite high demand in 1997.
More companies are expected to relocate from prime areas to
non-CBD areas, such as Jl. T.B. Simatupang in South Jakarta, in a
move more prompted by lifestyle requirements than worsening
traffic in the prime areas.
Shopping centers
The property consultancy First Pacific Davies Indonesia said
that the supply of retail space by the end of 1996 would increase
21.8 percent to 1.1 million square meters. Next year, the supply
will increase to almost 1.3 million square meters.
The retail market will be oversupplied over the next two years
as 358,000 square meters of retail space are scheduled to come on
line in 1998. The company believes, however, that the oversupply
will only happen for certain types of retail space.
International standard shopping centers with sound
fundamentals should continue to perform well. The fundamentals
include a sufficient population with an ability to spend, an
accessible site, a good design, an appealing mix of tenants and
capable management.
Scarce financing for construction is unlikely to ease in the
near future and could delay development proposals, deferring
future supply.
Shopping centers will see their occupancy rates drop 2.5
percentage points to 90 percent next year.
Apartments
Despite increasing demand, there will be an oversupply of
apartments next year. Total supply will reach 6,121 units next
year, with an occupancy rate decreasing from 79 percent this year
to 75 percent in 1997.
According to PSPI, more condominiums are likely to be
converted into apartments next year, increasing the supply of
apartments. But the firm said that the additional supply will be
absorbed due to strong demand for apartments in the central
business district.
Excess supply will force rental rates down from the current
$30 to $22 per square meter per month.
Condominiums
According to PSPI, the condominium market will see an
oversupply and weakening demand next year. As a result, prices
will drop from the average $1,800 per square meter in prime
locations and from the average of $750 per square meter.
Total supply is expected to reach 17,615 units next year.
Total sales will drop from the current 85 percent of the
supply this year to about 60 percent next year.
Industrial estate
According to PT Procon Indah, the total supply of industrial
estate space will increase to 3,625 hectares this year and
further expand to 4,115 hectares next year. This year's demand
dropped almost 40 percent to 285 hectares from 470 hectares last
year, but it is still higher than the average demand of about 200
hectares.
Demand next year is expected to range from between 275 and 300
hectares. The cumulative take-up rate next year is likely to
decrease three percentage points to 78 percent. But the
government's effort to relocate manufacturing firms to industrial
estates located mostly around Jakarta -- Karawang, Bekasi, Serang
and Tangerang (West Java) -- is expected to increase the
cumulative take-up rate.
Table: Name of developers and projects
No. Developer Land area Project name Location
(hectares)
--------------------------------------------------------------
1. Argo Manunggal 700 Alam Sutra Tangerang
2. Ciputra Group 1,200 Citra Indah Bogor
3. Ciputra Group 2,000 Citra Raya Tangerang
4. Ciputra Group 800 Pantai Indah Kapuk Tangerang
5. Ciputra Group 2,000 Puri Jaya Tangerang
6. Consortium 6,000 Bumi Serpong Damai Tangerang
7. Consortium 33,000 Jonggol Asri Bogor
8. Consortium 2,000 Kota Legenda Bekasi
9. Consortium 1,700 Lido Lakes Resort Bogor
10. Consortium 570 Manggarai Jakarta
11. Consortium 2,700 Pantura Jakarta Tangerang
12. Consortium 550 Rancamaya Bogor
13. Lippo Group 5,000 Lippo Cikarang Bekasi
14. Lippo Group 2,600 Lippo Karawaci Tangerang
15. Lippo Group 2,000 Royal Sentul Bogor
16. Metropolitan 5,400 Kota Baru Cikarang Bekasi
17. Modern Group 770 Kota Modern Tangerang
18. Pembangunan Jaya 2,300 Bintaro Jaya Jakarta
19. Salim Group 8,000 Kapuk Naga Tangerang
20. Summarecon Agung 1,700 Gading Serpong Tangerang
21. Tigaraksa 3,000 Tiga Raksa Tangerang
--------------------------------------------------------------
Total area: 83,990
Source: Econit Advisory Group