Low demand for apartments predicted for next year

Low demand for apartments predicted for next year

JAKARTA (JP): Apartment sales were dealt a serious blow by
simmering unrest in Jakarta over the past two months, with the
market unlikely to pick up in 1999, a property consultant said on
Monday.

Procon Indah, in association with Jones Lang Wootton, said in
its biweekly report that demand continued to slow down during the
third quarter of the year. A mere 19 transactions took place
between July and September -- 63.5 percent down on the second
quarter of this year.

"Some potential buyers backed out of decisions to purchase
upper priced condominiums and instead bought residential property
overseas due to increased social and political volatility (in
Indonesia)," the report said.

The unavailability of mortgage facilities due to high interest
rates also contributed to the further slump in demand.

By the end of September, 7,160 apartment units remained unsold
in Jakarta. Of these, 4,500 units were in the middle to low price
range, classified as below Rp 5 million (US$666) per square
meter. Buyers of this type of unit usually come from middle
income groups and are dependent on mortgage financing to make a
purchase.

Falling demand has forced most property owners to cut the
asking price when they put apartments on the market.

The average price of apartments in prime residential areas
excluding the Central Business District (CBD) dropped 9 percent
in rupiah terms over the third quarter, then by a further 15
percent in October and November.

In U.S. dollar terms, prices increased by 25 percent due to
the strengthening of the rupiah. However compared to 12 months
ago, U.S. dollar prices are down by 65 percent.

In the Central Business District, apartment prices stabilized
in rupiah terms during the third quarter, but dropped by 7
percent during October and November as a result of increased
social and political tensions in the country.

In dollar terms, CBD apartments rose by 37 percent in price on
the previous quarter. Prices are now 64 percent less than they
were in the third quarter of 1997.

Procon said that demand for condominium units was unlikely to
pick up in 1999 given the major political events scheduled for
next year.

Procon also said that 1999 would remain a bleak year for
Indonesia's economy.

It forecast that gross domestic product (GDP) would continue
to shrink in 1999, possibly by between two to four percent, while
inflation would fall to 20 percent per annum and benchmark
interest rates would drop to 20 percent by the end of the year.

These improvements would be insufficient to stoke up demand in
the apartments market until late in 1999, the report said.

"Demand for condominiums is expected to remain low until at
least the fourth quarter of 1999," it said.

The company also predicted that the number of unsold units
would rise as buyer defaults increased, especially in complexes
outside the CBD. It forecast that prices would drop further as a
result. (rid)