Makes more sense to purchase than to rent

Makes more sense to purchase than to rent

By Riyadi Suparno

Australian property companies, or their agents here, confirm
that the principal reason for Indonesians buying property in
Australia os to provide their children with accomodation because,
for those who can afford it, it makes more sense to purchese than
to rent.

JAKARTA (JP): Australian property developers know that
Indonesian parents will do whatever they can when it comes to
their children's education.

They are focusing on parents, especially those with children
studying in Australia, as their main market target in Indonesia.

Australian property companies, or their agents here, confirm
that the principal reason for Indonesians buying property in
Australia is to provide their children with accommodation
because, for those who can afford it, it makes more sense to
purchase than to rent.

It would be cheaper for those pursuing lengthy studies in
Australia to buy an apartment rather than rent as the monthly
installments would be lower than the cost of monthly rent,
according to Victor Li, general manager of Central Equity
Limited.

"If they plan to study in Melbourne for more than three years,
for instance, it is much cheaper to buy an apartment to live in
rather than to rent," said Li of Central Equity that, in
association with PT Jembatan Titian Emas, markets various types
of properties in Melbourne.

Such a benefit encourages more and more Indonesian parents to
purchase apartments in Australia for their children to live in.

According to data at the Indonesian Embassy in Canberra,
Indonesian students have been the largest group of foreign
students studying in Australia since 1998, when Indonesia was at
the height of its economic crisis.

Last year alone, the number of Indonesian students reached
17,626, mostly taking graduate, undergraduate and vocational
courses or attending high school.

The number was relatively less than the 18,748 students
registered the previous year. The figure was 17,462 in 1998,
18,180 in 1997 and 16,654 in 1996.

Interestingly, most Indonesian students in Australia are self-
funded. This huge number of Indonesian students in Australia,
especially self-funded students, provides big opportunities for
Australian property companies to sell or lease their properties
to Indonesian parents.

And it takes two to tango. Indonesian parents are also willing
to purchase Australian property because of the need to provide
accommodation for their children. This is supported by prevailing
regulations in Australia.

Australian regulations make it clear that foreigners can own
property there. Although it varies across states, basically in
Australia, 50 percent of every property project must be sold to
Australians and the remaining 50 percent can be sold to
foreigners.

Moreover, the Australian banking industry is also very
supportive of foreigners applying for housing loans to buy
property in the country, with relatively low interest rates.

Most of all, prices of Australian properties are still
relatively low, compared to those in Singapore, Hong Kong, Japan,
the United States and the United Kingdom, said Oesep Harry,
chairman of PT Raine and Horne Indonesia.

"Therefore, there is a big opportunity for substantial capital
growth," he said, adding that his company would soon join the
fray and offer Australian properties managed by Raine & Horne to
Indonesian customers.

Besides for their children's accommodation, for some people,
buying property in Australia -- just like buying property in any
other developed country -- is driven by business considerations
as buying Australian property promises prospective capital growth
and potential gains.

For some Indonesians, purchasing property in developed
neighboring countries such as Australia constitutes a hedging
strategy to maintain the value of their money against the
depreciation of the rupiah and inflation.

Lucy Rumantir, a director at property consultant PT Procon
Indah that acts as an agent for a number of Australian properties
for the Indonesian market, confirmed that many Indonesians were
buying property offshore as an investment. Especially in
Australia, she said, some properties provide rental guarantees.

"Due to the crisis, more people are buying property overseas,
believe it or not," she said.

Lucy said the increasing number of people buying property in
Australia had indirectly affected the local property market.

"As a small-scale investment, it affects it as their money
seems to be used overseas," she said.

Demand for Australian property will continue to increase, but
the Australian Embassy in Jakarta does not appear to support this
in its assessment of visa applications.

Lucy complained that many times potential buyers in Indonesia
could not get a visa to visit Australia to see the property
themselves prior to signing the contract of sale.