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.