Many developers will go bankrupt next year: PSPI

JAKARTA (JP): About 625, or 25 percent of the country's 2,500 developers, will go bankrupt next year because of their liabilities, legal problems and the weakening market, property consultancy PSPI Research predicted yesterday.

"The bankruptcies will be caused mostly by legal problems and problem loans," said PSPI Research chairman Panangian Simanungkalit.

He said the legal problems related to the government's recent decision not to issue anymore land clearing licenses to developers in Greater Jakarta, where most of the 625 developers were based.

About 60 percent of the companies expected to go bankrupt were small or medium size developers, he said.

Panangian said problem loans in the property sector would increase 6.67 percent to Rp 5.60 trillion (US$2.41 billion) next year from Rp 5.25 trillion this year.

He said developers could not rely on financial markets next year to fund their projects.

"Banks are likely to reduce their property credits by 41.67 percent to Rp 7 trillion next year, from about Rp 12 trillion this year," he said.

He said only developers with sufficient capital and good management and staff would survive.

"The property market will weaken next year because of weak demand and oversupply," he said, adding that the weakening market would partly result from perceived political uncertainty.

He said house sales would drop 12 percent to 132,000 units next year.

Sales of middle-class houses -- with prices ranging from Rp 75 million to Rp 150 million -- would drop 10 percent and transaction values would decline 12 percent.

Sales of high-class houses -- costing more than Rp 150 million -- would drop 15 percent and transaction values decrease 20 percent.

He said demand for houses would drop because most speculators, who dominated the market, would out play the market.

In Greater Jakarta, there would be an oversupply of apartments and town houses, with 6,121 units on the market next year, despite increased demand.

Apartments and town house rents would fall 26.67 percent to $22 a square meter a month next year, from $30 this year.

Condominiums

PSPI said sales of condominiums in Greater Jakarta would drop 25 percentage points to 60 percent next year, with 17,615 condominiums on the market.

There would be an oversupply of shopping centers in Greater Jakarta, despite demand increasing, with 1.87 million square meters of retail space next year, but occupancy rates would drop from 89 percent this year to 86 percent next year.

PSPI said retail rents would fall from $75 a square meter a month this year to $71 a square meter next year.

But the supply of office space in Greater Jakarta would drop amid rising demand. Office rents would increase from $13.5 a square meter a month this year to $15 a square meter a month next year, PSPI said.

Office supply is expected to total 2.65 million square meters next year, while occupancy rates are to rise two percentage points to 92 percent next year. (bnt)