Jakarta's property market shows no growth: PwC

Viva Goldner, The Jakarta Post, Jakarta

Jakarta's depressed property market showed no immediate signs of improvement, with regional and global economic factors contributing to minimal growth last year, according to consulting firm PricewaterhouseCoopers (PwC) Property Group.

PwC technical advisors Katherine Harberd and Jay Smith painted a gloomy picture of the local market during a presentation of Jakarta Property Trends for the fourth quarter 2001 on Wednesday.

Harberd said negative business confidence following the US terror attacks of Sept. 11 was reflected in the condition of Indonesia's property market.

"The government has indicated that during 2001 there were substantial decreases in the number of approved foreign direct investment (FDI) projects -- FDI was actually down 41 per cent from the previous year," she said.

"These statistics on approvals demonstrate a more cautious approach to investment in Indonesia, and clearly this has an impact on all business sectors -- and ultimately property, in offices, apartments, hotels, industrial and retail properties," Harberd said.

Minimal growth was most evident in sectors reliant on expatriate demand, such as apartments and hotels, while the office sector suffered from reduced multinational corporate investment.

Jakarta office occupancy increased just 0.5 percent to 78.5 percent from the third quarter, with net take-up for 2001 falling 54 per cent from the previous year.

New tenants were in shipping, trading, telecommunications, insurance, media, and expanding tenants in consulting, banking and energy.

"Certainly by the end of last year, it was very clear that office take-up was considerably down on the previous year. There aren't any signs at present of increasing take-up or recovery in the office sector," Harberd said.

However, sectors reliant on the domestic market, such as retailing and shophouses, reported higher growth.

Occupancy in the Jakarta retail sector rose from 93.8 percent to 94.6 percent in the fourth quarter, while in Jakarta's surrounding areas, occupancy rose from 90 percent to 92 percent.

Shopping center stock increased by 41,000 square metres through the operations of Glodok Plaza, Pasar Glodok, Citra Grand Mal and Plaza Cibubur.

In particular, Harberd said investors were increasingly attracted to the low risk and potential high returns offered by shophouse developments.

The shophouse sector experienced strong growth towards the end of 2001, after plummeting from 1998-2000 due to the economic crisis.

At least 1,800 units (about 540,000 square metres) were completed or marketed in 2001, with good demand in the Kelapa Gading, Pondok Indah and Dharmawangsa areas, despite high prices.

However, Smith said domestic conditions, such as the government's recent decision to increase fuel and electricity rates, would also impact on the local property market.

"Certainly, fuel and electricity rate increases do have an impact on property investment, as well as property operating costs and, ultimately, property values," he said.

Overall, PwC forecast limited growth for Jakarta's property market in 2002.

"The property sector depends so much on the local, regional and global economy, and all of the local social and economic issues that the country has to deal with," Smith said.

"Our forecast for this year is hopefully for stability -- not a lot of growth, but hopefully no loss of momentum from last year."